ISLAMABAD – As Pakistan prepares to unveil its next federal budget 2026-27, fresh proposals from an economic think tank have put defence spending in the spotlight as it calls for higher salaries and pensions for armed forces personnel, increased funding for military development projects, and dedicated allocations for potential wartime needs.
Economic Policy and Business Development (EPBD) has put forward recommendations for upcoming national budget, calling for increases in salaries and pensions of the armed forces along with a major expansion in defense funding.
It said salaries of military personnel should be increased in line with the recommendations of the Pay and Pension Commission, reshaping long-term retirement benefits for thousands of former service members. think tank urged substantial boost in funding for armed forces’ development projects, signaling an expanded focus on military modernization and infrastructure.
EPBD further recommended that the National Finance Commission consider sharing defense expenditures with provincial governments—a move that could significantly shift fiscal responsibilities across the federation.
The report said military expenditures could reach Rs2,750 billion this year, and potentially climb to Rs2,959 billion in the next fiscal year if current trends continue. It also recommends allocating dedicated funds in the upcoming budget to prepare for potential wartime contingencies.
Budget 2026-27
On the other hand, federal government proposed Rs17.1 trillion budget for FY2026–27, targeting 4.1% GDP growth and 8.4% average inflation, with Rs15.267 trillion in tax revenue and Rs2.768 trillion in non-tax revenue. The budget will be presented in the National Assembly on June 5, 2026, following key pre-budget meetings: NEC approval of the PSDP on June 3 and the release of the Economic Survey on June 4.
Key allocations include Rs7.824 trillion for debt interest payments, Rs2.665 trillion for defence, Rs1.1 trillion PSDP, and a Rs1.727 trillion petroleum levy target. The budget is being prepared in consultation with the IMF, with most policy decisions already aligned.
For salaries and pensions, the government is considering a 7%–10% increase, while employees are demanding up to 100% increases and have announced protest plans ahead of the budget.
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