• Rs2.55tr allocation is 20pc higher, biggest annual hike in a decade
• Military budget jumps to 1.97pc of GDP, up from 1.7pc last year
ISLAMABAD: The federal government on Tuesday proposed an allocation of Rs2.55 trillion for the country’s armed forces in the fiscal year 2025-26, marking the highest annual increase in defence spending in over a decade, amid heightened tensions with India and last month’s military clashes between the two nuclear-armed neighbours.
The new allocation represents a 20.2 per cent rise over the previous year’s budget of Rs2.122tr, pushing defence spending to around 1.97pc of GDP — up from 1.7pc last year — as it inches back to 2pc after years of incremental decline. The increase also contrasts with the decline in national spending on health and education in terms of GDP, with figures for the first nine months of the outgoing fiscal year well below 1pc.
The defence spending hike also means a rise in its share of the total federal outlay to 14.51pc, the highest in recent years.
Presenting the budget in the National Assembly, Finance Minister Muhammad Aurangzeb said, “The security situation in the country is precarious and the armed forces have rendered commendable service in protecting the borders.”
The military allocation comes against the backdrop of heightened regional tensions, including clashes with India in May 2025 and a concurrent 9.5pc increase in India’s defence budget to 6.81tr Indian rupees. Internal security operations in Khyber Pakhtunkhwa and Balochistan have also contributed to the rising expenditure on security, though internal security spending is met from a separate budget head.
The Rs2.55tr defence allocation — about $9.18 billion — includes key hikes in operational and infrastructure expenses. Operating costs, which cover fuel, rations, training and medical treatment, are set to rise 37.22pc to Rs704.4bn. Civil works, such as infrastructure development, will increase by 37.4pc to Rs336.5bn.
A 3.8pc increase has been proposed for employee-related expenses, covering salaries and allowances for servicemen, with Rs846.03bn earmarked for this purpose. The finance minister said that officers, junior commissioned officers and soldiers would receive a special relief allowance, funded from within the defence budget.
Spending on physical assets — covering arms and equipment procurement — is set to climb 20.9pc to Rs663.1bn. Large-scale military acquisitions and funding for the country’s nuclear and missile programs are believed to be channelled through classified allocations not reflected in the published defence budget.
The employee-related expenses, which account for 33.18pc, remain the largest chunk, though dropping from 39pc in FY25. Operating expenses now take 27.62pc, up from 25pc in the outgoing year.
Physical assets, meanwhile, claim 26pc, which is a slight increase from 25.8pc in 2024-25. Civil works would receive 13.2pc, rising from 11.5pc, underscoring a growing emphasis on military construction and facilities.
Compared to the outgoing year, the share for employee-related expenses has declined by 5.82 percentage points, while operating expenses and civil works have gained 2.62 and 1.7 percentage points, respectively, pointing to a reallocation of resources to address heightened security needs amid regional tensions.
Service-wise allocations are as follows: Army, Rs1.17tr (45.9pc of the total); Pakistan Air Force, Rs520.75bn (20.4pc); Navy, Rs265.97bn (10.4pc); and Inter-Services Organisations, Rs498.11bn (19.5pc). All services received around a 15.45pc increase, with the Army’s slightly higher 15.84pc rise.
A closer examination of the defence allocation of Rs 2.55 trillion reveals an unallocated amount of Rs 95.17 billion, as the combined allocation for the Army, PAF, Navy, and Inter-Services Organisations totals Rs 2.45483 trillion. This discrepancy suggests the unallocated funds may be directed toward operational costs not directly tied to specific services.
In addition to the defence budget, Rs1.055tr has been set aside for military pensions — a 4.04pc increase over the previous year. While not part of the defence budget, military pensions constitute roughly 6pc of the total Rs17.573tr federal outlay.
The latest figures suggest a continuing shift away from the decade-long trend of modest annual increases of around 11pc, with the 2025-26 hike being the third consecutive rise from what had become a routine annual raise.
The increase looks to be driven by Pakistan’s evolving security needs, regional dynamics and a push to modernise and maintain readiness across all branches of the military.
Despite the increase, Pakistan’s defence spending remains considerably lower than that of India, whose military expenditure stands at nearly nine times higher in dollar terms.
According to the Stockholm International Peace Research Institute’s April 2025 report, South Asia’s military expenditure continues to rise due to geopolitical rivalries and modernisation initiatives across the region.
Published in Dawn, June 11th, 2025
