Pakistan is reviewing plans to further increase the defence budget for fiscal year 2025-26 in response to rising security challenges from India and to boost indigenous defence research and development.
The Express Tribune reported, citing official sources, that the authorities are considering whether the previously agreed 18% hike over last year’s Rs2.1 trillion allocation will be sufficient, given rapid developments in the security environment. The matter has been discussed extensively among the Ministry of Finance, the Ministry of Defence, and with the International Monetary Fund (IMF), as the government evaluates its fiscal space to accommodate increased defence spending.
While the IMF had projected Rs2.42 trillion for defence expenditures — a 12% increase — government sources revealed that the IMF has not objected to higher defence spending, provided it does not compromise the primary budget surplus target of around Rs2.2 trillion, or 1.7% of GDP.
Finance Minister Muhammad Aurangzeb emphasised that the government remains committed to structural reforms and meeting all fiscal benchmarks, saying, “We remain committed to stay the course both in terms of the structural reform agenda and meeting all quantitative and structural benchmarks.”
The discussions have gained urgency as Jihad Azour, the IMF’s regional director, visited Islamabad and held meetings with Finance Minister Aurangzeb and other senior officials. Azour is also scheduled to meet Prime Minister Shehbaz Sharif to discuss the country’s fiscal and economic priorities.
Officials disclosed that, to address heightened security needs, the defence budget may have to increase by at least one-fourth, which would require an additional Rs500 billion beyond the current fiscal year’s allocation. This funding is crucial for replenishing military arsenals, advancing the armed forces’ development programme, and settling past defence-related liabilities. Currently, Rs270 billion is allocated for the armed forces development programme, but this figure may need significant revision considering regional dynamics.
Financing the additional defence expenditure is also a key concern. The federal government, operating under a fiscal deficit, has proposed that provincial governments contribute to the increased defence budget, given their cash surpluses. During a recent meeting chaired by the Prime Minister, Petroleum Minister Ali Pervaiz Malik suggested provinces bear at least half of the extra defence costs. Officials cited recent Indian attacks on Punjab and Sindh as reasons why provinces should share the financial burden.
The Finance Ministry is further exploring redirecting funds from unproductive subsidies, including certain banking sector schemes, toward defence spending.
The government aims for the upcoming defence budget to be a one-time exceptional increase to strengthen Pakistan’s army, navy, and air force amid persistent regional tensions with India.
