Pakistan might raise its defense budget for FY2025-26 by 24 percent or Rs. 500 billion to approximately Rs. 2.6 trillion to counter potential Indian acts of war in the future.
The earlier proposal was an 18 percent increase over last year’s Rs. 2.1 trillion allocation. However, authorities now believe this is insufficient, reported Express Tribune.
The increase is intended to replenish depleted arsenals, expand the armed forces development programme beyond the current Rs. 270 billion, and settle outstanding military liabilities. It is described by officials as a one-time adjustment to strengthen the army, navy, and air force.
The IMF has not objected to a higher defense allocation as long as Pakistan maintains its primary budget surplus target of Rs. 2.2 trillion, or 1.7 percent of GDP.
To fund the increase, the Finance Ministry is evaluating cuts in unproductive subsidies, particularly over Rs. 1 trillion in power sector allocations, which continue despite falling electricity prices. Some banking sector subsidies may also be reallocated.
The federal government is also urging provinces to contribute to the additional cost.
Meanwhile, political pressure is building to expand the Rs. 921 billion Public Sector Development Program. Coalition partners are demanding over Rs. 1 trillion, but the Finance Ministry prefers limiting development spending to prioritise defense.
With tensions escalating and fiscal space limited, the government is naturally prioritising defense.