Pakistan is hiking up its military spending by 20% this year after clashing with India – but can it afford to? The country just signed a $7 billion bailout with the International Monetary Fund in 2024, and Pakistan will have to fulfill strict conditions while balancing defense needs.
The country is seeking to kickstart growth while finding resources for an expected hike in defence expenditure following the conflict with India.
Islamabad will also have to contend with remaining within the discipline of its International Monetary Fund programme and the uncertainty from new trade tariffs being imposed by the United States, its biggest export market.
Media reports say the government is likely to present a 17.6 trillion rupee ($62.45 billion) budget for the fiscal year beginning July 1, down 6.7% from this fiscal year.
Analysts said they expect an increase of around 20% in the defence budget, likely offset by cuts in development spending.
Pakistan allocated 2.1 trillion Pakistani rupees ($7.45 billion) for defence in the outgoing fiscal year, including $2 billion for equipment and other assets. An additional 563 billion rupees ($1.99 billion) was set aside for military pensions, which are not counted within the official defence budget.
India’s defence spending in its 2025–26 (April-March) fiscal year was set at $78.7 billion, a 9.5% increase from the previous year, including pensions and $21 billion earmarked for equipment. It has indicated it will step up expenditure following the May conflict with Pakistan.
The government of Pakistani Prime Minister Shehbaz Sharif 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.
Pakistan’s growth lags far behind the region. In 2024, South Asian countries grew by an average of 5.8% and 6.0% growth is expected in 2025, according to the Asian Development Bank.
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