Pakistan Allocates Over $6 Billion for Defense in New Budget Amid Economic Challenges

The Pakistani government plans to spend PKR 1.804 trillion on defense in the next year, according to a report by Dawn. This new allocation is around 13% higher than the revised amount for the current year. The defense budget makes up approximately 1.7% of the GDP and 12.5% of the total government expenditure for the next year.

Despite the International Monetary Fund (IMF) urging Pakistan to reduce defense spending or increase the Goods and Services Tax (GST) rate to generate additional revenue, the government has decided to increase the defense allocation. The government imposed a 25% GST on various consumer goods as demanded by the IMF but did not decrease defense spending.

Last year, Pakistan initially allocated PKR 1.57 trillion for defense but later revised it to PKR 1.59 trillion. The Pakistan army received PKR 825 billion, the air force received PKR 369 billion, and the navy received PKR 189 billion from the total budget. Additionally, the pension of retired military officials was increased by 26%.

It is important to note that military pensions, strategic nuclear arsenal expenses, defense-related procurements, and strategic programs are not itemized in the defense budget. The defense budget includes funds for defense administration, employee expenses, operating expenses, physical assets, and civil works. Specifically, PKR 5.4 billion is allocated for defense administration, PKR 705 billion for employee costs, PKR 442 billion for operating expenses, PKR 461 billion for physical assets, and PKR 195 billion for civil works.

The government's decision to increase the defense budget, along with raising salaries and pensions for government employees, is seen as a populist move with upcoming elections in mind. The finance minister, Ishaq Dar, stated that no new taxes would be imposed this year, and the government aims to provide relief to the people. Dar expressed confidence that Pakistan has overcome its economic vulnerabilities and assured that the country will not default on its financial obligations.

Dar and Prime Minister Shehbaz Sharif are hopeful that the budget will help access the locked bailout funds from the IMF. They believe that the budget is in line with the IMF's expectations.