Pakistan outlined a significant hike to its defense budget for FY26 on Tuesday amid heightened tensions with India. The Shehbaz Sharif-led government announced a 20% hike to Rs 2.55 trillion for the segment while overall spending was reduced by 7% to Rs 17.57 trillion. The cash-strapped nation is hoping to kickstart growth while finding resources for the sharp hike in defense expenditure following its worst clash with India in nearly three decades.
The budget presented on Tuesday also projected a deficit of 3.9% of GDP against the 5.9% targeted for 2024-25. Inflation was projected at 7.5% and growth at 4.2%. The numbers came less than a day after the country released its economic survey and “announced a 2.7% growth for 2025”. Islamabad had lowered the target to 2.7% last month after an initial goal of 3.6% GDP growth. Meanwhile the International Monetary Fund expects real GDP to grow by 2.6% in FY25 while the economy grows 3.6% in FY26.
Sharif’s government has projected 4.2% economic growth in 2025-26, saying it has steadied the economy, which had looked at risk of defaulting on its debts as recently as 2023. Growth this fiscal year is likely to be 2.7%, against an initial target of 3.6% set in the budget last year.
The Rs 2.12 trillion (approximately $ 7.45 billion) defense allocation for the outgoing fiscal year also included $ 2 billion for equipment and other assets. An additional Rs 563 billion ($ 1.99 billion) was set aside for military pensions, which are not counted within the official defence budget. The Pakistan government had allocated Rs 2.122 trillion for defense last year — reflecting a 14.98% increase over the Rs 1.804 trillion budgeted for the fiscal year 2023-24.
Meanwhile the Indian defense spending India’s defence spending for FY26 was set at $ 78.7 billion earlier this year — marking a 9.5% increase from FY25. The figure includes pensions as well as $ 21 billion earmarked for equipment. New Delhi had indicated to will step up expenditure following the conflict with Pakistan.
NOTE: The use of Rs refers to the Pakistani rupee which uses the same abbreviation. As per the latest exchange rates, one Pakistani rupee is equal to 0.30 INR (Indian rupee).
(With inputs from agencies)