Pakistan’s 18% Defence Budget Hike Amid Economic Crisis
Pakistan has announced an 18% increase in its defence budget for the fiscal year 2025-26, raising the allocation to over Rs 2.5 trillion. This decision comes amid ongoing negotiations with the International Monetary Fund (IMF), which has expressed concerns over the country’s fiscal priorities during its economic crisis.
The proposed hike in defence spending has led to disagreements with the IMF, delaying the final approval of a crucial bailout package. The IMF has emphasized the need for credible proposals to offset the impact of increased defence expenditures and tax cuts. Pakistan’s budget presentation has been postponed to June 10 to address these concerns.
IMF Concerns Over Fiscal Priorities
The IMF has highlighted the potential risks of increased defence spending on Pakistan’s economic recovery. With the country facing a high debt-to-GDP ratio and inflation exceeding 38%, the IMF has stressed the importance of allocating resources to essential sectors like health and education. The lender has called for strict fiscal discipline and credible revenue-generating measures to ensure economic stability.
Economic Crisis and Defence Spending
Pakistan’s decision to boost defence spending amid its economic crisis has sparked debate over its fiscal priorities. Economists warn that the increased allocation could jeopardize economic reforms and social spending, especially with the country being one of the IMF’s largest borrowers. The scale of defence spending has led to concerns over whether IMF funds, meant for economic recovery, have indirectly freed up budget resources for military purchases.
Regional Tensions and Strategic Considerations
The defence budget hike is reportedly a response to escalating tensions with India following the April 22 Pahalgam attack that killed 26 people. Pakistan views India as an “existential threat” and has historically allocated a significant portion of its budget to defence. In FY25, Pakistan’s defence spending stood at 2.3% of its GDP, higher than India’s proportion of 2%.
Conclusion
Pakistan’s increased defence spending amid its economic crisis has raised concerns over its fiscal priorities and the potential impact on its negotiations with the IMF. The country’s decision to allocate more funds to the military, despite its dire economic situation, underscores the ongoing debate over balancing national security with economic stability.
