With national security taking centre stage, Pakistan’s 2025–26 federal budget shifts billions toward defence, raising questions about what’s left for health, education, and development.
In its most security-focused budget in years, Pakistan has increased defence spending by a significant 20%, raising the military allocation to 2.55 trillion rupees (around $9 billion), about 1.97 % of Pakistan’s GDP for the fiscal year 2025–26. The move comes amid renewed tensions with India following a deadly military exchange in early 2025.
Government officials claim this increase is essential for national defence. But with subsidies cut, trimmed development budgets, and underfunded social sectors, economists warn that Pakistan may prioritize short-term stability at the cost of long-term progress.
Security First, But at What Cost?
Finance Minister Muhammad Aurangzeb defended the budget, citing threats along the eastern border. The 2025 skirmishes involving missile and drone strikes with India triggered fears of further escalation, prompting the government to allocate more resources toward defence readiness.
The army, long seen as the most powerful institution in Pakistan’s defence and political spheres, has received 1.17 trillion rupees ($4.1bn), accounting for nearly 46 % of the total defence budget. The air force and navy received just more than 520 billion rupees ($1.8m) and 265.9 billion rupees ($941m), respectively, a cost not included in the official defence budget but drawn from public funds.
Shrinking the Civilian Pie
While the military budget has grown, the total federal budget shrank by 7%. Development spending has been cut, and the subsidy bill slashed as part of compliance with the International Monetary Fund’s (IMF) loan program.
The opposition party of former Prime Minister Imran Khan condemned the budget as “anti-people” and designed to serve the interests of the elite rather than the masses.
Key areas likely to be impacted include:
- Health and education, which already receive under 1% of GDP.
- Infrastructure projects, with trimmed allocations for roads, energy, and water.
- Social welfare schemes include income support and utility subsidies.
Economic Recovery Meets IMF Restraints
Pakistan’s economy is slowly recovering, with:
- Foreign reserves exceeding $11 billion
- Inflation easing to below 12%
- A modest growth target of 4.2%
However, the country remains under strict IMF oversight, with requirements for fiscal tightening, tax expansion, and subsidy reduction. As a result, the 2025–26 budget is heavy on belt-tightening and light on investment in public services.
“This is a budget for stabilization, not transformation,” said Sajid Amin Javed, Deputy Director at the Sustainable Development Policy Institute (SDPI). “It may help restore confidence in the short term, but it lacks the structural reforms needed to unlock long-term growth at least for now.”
The Tax Trap: Not Enough to Go Around
Pakistan’s tax-to-GDP ratio remains below 10%, among the lowest in South Asia. With only 1.3% of citizens filing income tax returns, the state’s revenue base is too small to meet both defence and development needs.
Hasanain of LUMS said that Pakistan spends less, as a percentage of GDP, than countries like Singapore, Greece or the United States, and nearly three times less than Saudi Arabia, Russia, or Israel.
But he pointed out that Pakistan also collects far less tax than most other countries, so the defence spending hike still eats up a giant chunk of the government’s revenue. “A low tax to GDP ratio means that defence spending is a bigger burden for the government in Pakistan than most other countries in the world.”
Can Pakistan Afford Guns Over Butter?
Defence planners argue that without security, there can be no prosperity. But critics say that without investment in education, health, and economic infrastructure, Pakistan cannot truly be secure. Many fear that underinvestment in the social sector will slow long-term economic growth and worsen inequality.
Economist Hina Shaikh argued that the budget lacks inclusive or pro-poor reforms and shows limited investment in sectors like health and education.
“This may be called a technocrat’s budget under IMF constraints, fiscally conservative, tax-heavy, and focused on short-term stabilisation. It is focused on restoring macroeconomic stability, controlling inflation, and building reserves,” she said.
Conclusion: A Delicate Balancing Act
Pakistan’s latest budget reflects a classic dilemma: how to fund security without undermining social progress. The increased defence spending may bring short-term strategic advantage, but unless balanced with long-term investment in people and institutions, the country risks trading today’s safety for tomorrow’s stagnation.
As Prime Minister Shehbaz Sharif recently declared, Pakistan aims to outpace India economically, not just militarily. Achieving that will require more than missiles and troops. It demands reform, equity, and a broader vision for national development.
