Pakistan likely to hike defence spending in new budget

Pakistan will unveil on Tuesday its annual federal budget for the next fiscal which is likely to see a substantial hike in defence expenditure.

The total budget size is expected to be Rs 17.6 trillion.

Finance Minister Muhammad Aurangzeb will present the budget document as a finance bill in the National Assembly.

The government eyes a record revenue target of nearly Rs 14 trillion for FY-2025-26, a 22 per cent increase over projections for the outgoing fiscal year.

It is set to target 4.2 per cent GDP growth and limit inflation to 7.5 per cent.

The proposed tax-to-GDP ratio target for FY26 is 12.3 per cent, which is still short of 14 per cent, Aurangzeb said on Monday.

The highlight of the budget would be the defence expenditure, which is expected to get broad support from the lawmakers following Pakistan’s recent confrontations with India.

Tensions between India and Pakistan escalated after the April 22 Pahalgam terror attack, with India carrying out precision strikes on terror infrastructure in Pakistan and Pakistan-occupied Kashmir on May 7.

The on-ground hostilities from the Indian and Pakistan sides that lasted for four days ended with an understanding of stopping the military actions following talks between the directors general of military operations of both sides on May 10.

Though there is no official word about the increase in the defence expenditure, the government had endorsed an 18 per cent increase in defence spending during the budget-making process.

The Express Tribune newspaper reported last month that the Pakistan Peoples Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N) agreed to increase the defence budget by 18 per cent to over Rs 2.5 trillion in light of the prevailing security threats.

In the current fiscal of 2024-25, the government allocated Rs 2,122 billion for defence spending, reflecting a 14.98 per cent increase over Rs 1,804 billion budgeted for the fiscal year 2023-24.

The defence sector expenses are the second-biggest component of the annual expenditure of the country after debt payments. In the current year, Rs 9,700 billion allocated for debt servicing constitutes the single biggest expense of the country.