Pakistan Plans Defence Budget Hike Amid India Tensions

Pakistan is set to unveil its annual federal budget for the fiscal year 2025-26 with an expected total size of Rs 17.6 trillion, featuring a substantial hike in defence expenditure amid escalating tensions with India. The government aims for a 22 percent increase in revenue targets to nearly Rs 14 trillion, targeting 4.2 percent GDP growth and limiting inflation to 7.5 percent, while setting a tax-to-GDP ratio target of 12.3 percent. Defence spending is anticipated to rise by 18 percent to over Rs 2.5 trillion, reflecting Pakistan's response to recent confrontations with India, including precision strikes and subsequent military hostilities in May. Despite the increase in defence allocation, Pakistan faces significant fiscal challenges with a debt load reaching PKR 76,000 billion and a fiscal deficit projected at 4.8 percent of GDP, while growth lags behind regional peers. The budget aims to balance security needs with fiscal discipline under the IMF program, even as Pakistan contends with external economic pressures such as new US trade tariffs. Lawmakers from major political parties have broadly supported the defence budget increase, highlighting the prevailing security threats.