Massive 20% Defense Budget Hike Amid Deep Cuts Elsewhere

Pakistan has announced a massive 20% increase in its defense budget, the biggest jump in over 10 years, as tensions with India rise again. The decision comes even as the country struggles with a fragile economy and relies heavily on IMF loans for financial support.

Finance Minister Muhammad Aurangzeb shared the new budget on June 10, proposing 2.55 trillion rupees ($9 billion) for the army, air force, and navy. This now makes up 1.97% of Pakistan’s GDP, up from 1.7% last year.

“The security situation remains serious, and our armed forces are doing a great job protecting the country,” Aurangzeb said, following recent border clashes with India.

Why Was the Defense Budget Increased?

The hike follows Indian missile strikes on May 7. India blamed Pakistan for a deadly attack in Indian-administered Kashmir and responded by targeting what it called "terrorist camps" in Pakistan.

Pakistan denied any involvement and called for an independent investigation. In the days that followed, both countries exchanged missile and drone attacks, causing over 70 deaths before a ceasefire was brokered by U.S. President Donald Trump on May 10.

With India also raising its defense budget to $78.7 billion, a 9.5% rise, Pakistan’s increase was widely expected. But Pakistan has an added challenge — it’s under tight financial rules from the IMF.

Balancing Security and a Weak Economy

While the defense budget has increased, the overall national budget has gone down to 17.57 trillion rupees ($62 billion) — nearly a 7% decrease.

The military’s budget has almost doubled in five years. In 2020-21, it was 1.28 trillion rupees, and now it’s 2.55 trillion. The army alone is getting 1.17 trillion rupees ($4.1 billion) — about 46% of the total defense spending. The air force and navy will receive over 520 billion rupees ($1.8 billion) and 265.9 billion rupees ($941 million), respectively.

Experts say this spending hike is part of a global trend. According to a SIPRI report, global military spending reached $2.7 trillion in 2024, the highest rise since the Cold War.

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Cuts in Other Sectors Raise Concerns

To manage the increased defense spending, Pakistan has made deep cuts in subsidies and plans to expand its tax base by removing tax exemptions and introducing new taxes.

Still, the country’s external debt is around $87.4 billion, and debt servicing alone will cost $29 billion, nearly 47% of total spending.

Opposition parties, especially the jailed former PM Imran Khan’s PTI, have criticized the budget, calling it “anti-people”. They argue it offers little relief to the public and neglects agriculture, health, and education.

Experts Divided on the Budget

Economist Hina Shaikh said the budget shows the government’s focus on security during geopolitical tensions, but warned it comes at a time when the economy is only slowly recovering.

Ali Hasanain, a professor at LUMS, said the hike is "inevitable and necessary" but also a burden. He pointed out that while Pakistan spends less as a share of GDP compared to countries like Russia or Israel, it has a very low tax collection rate, which makes such spending harder to manage.

“Without deep structural reforms, Pakistan can’t balance its defense needs and economic future,” Hasanain warned.

Short-Term Stability, Long-Term Questions

After hitting a low of just $3 billion in reserves in 2023, Pakistan’s foreign reserves have now improved to $11 billion thanks to IMF deals. The rupee has also stabilized between 280–282 per dollar after a long decline.

Still, experts say the new budget focuses more on short-term stability than long-term growth. It is seen as a technocrat budget made with IMF input, focused on macroeconomic targets and inflation control, but lacking in real reforms that could help ordinary people.

Pakistan’s 20% defense budget hike shows its security priorities during difficult times. However, this comes at the cost of cuts in other critical areas, raising serious questions about the impact on people’s lives. As the country moves forward, only real economic reforms, stronger tax collection, and long-term planning can help it find the right balance between security and stability.