Pakistan Increases Defence Budget by 20% for FY26

Pakistan has earmarked Rs2.55 trillion for its defence budget in the upcoming fiscal year 2025-26, marking a 20% surge from the previous year’s proposed allocation.

In the FY25 budget, the government initially suggested Rs2.12 trillion, which was subsequently adjusted to Rs2.19 trillion. When juxtaposed with the revised budget from the prior year, the projected increase for the approaching fiscal year approximates 17%.

This boost in defence spending occurs amidst continuing tensions between Pakistan and neighboring India.

Finance Minister Muhammad Aurangzeb unveiled Pakistan’s federal budget for 2025-26 on Tuesday, focusing on fostering a “competitive economy” with a targeted growth rate of 4.2% for the next fiscal year, in contrast to the anticipated 2.7% for the current FY25.

“The nation’s defence stands as our utmost concern,” Aurangzeb stated during his address, acknowledging the contribution of the country’s leadership, notably the armed forces, in addressing recent skirmishes with India.

Pakistan had allocated Rs2.12 trillion for defence in FY 2024-25. There was a 16.4% rise in its defence budget the previous year.

The government has also proposed offering specific allowances to armed forces officers and soldiers in recognition of their services.

These expenditures will be financed by the defence budget for the fiscal year 2025-26.

Prime Minister Shehbaz Sharif remarked during a federal cabinet meeting that Pakistan is now positioned for advancement, with all economic indicators showing improvement.

“Having prevailed over India in a conventional conflict, the nation must now outshine it economically,” the Prime Minister commented.

He further emphasized that with determination and zeal, anything is achievable, and collective, continuous effort is essential for progress.

Earlier, Tola Associates, a tax advisory and consultancy firm, suggested increasing the defence budget to Rs2.8 trillion, a 32% increase compared to the last fiscal year, citing the ongoing “war situation with the neighboring country and new recruitment of army personnel”.

Relations between Pakistan and India deteriorated following a devastating incident in Indian Illegally Occupied Jammu and Kashmir (IIOJK) last month, which New Delhi attributed to backing from Islamabad.

While Pakistan refuted involvement, intense combat ensued when India targeted alleged “terrorist camps” within Pakistan. Both nations then consented to a ceasefire, which has generally been upheld.