Pakistan's Budget Reflects Military Interests Amid Strained Relations with Neighbors

Strategic Insights -

The recent budget for fiscal year (FY) 2025-26 in Pakistan has significant implications for the country's economy and its relationships with neighboring countries. The budget, presented on Tuesday, has slashed development outlay by 50% while increasing the defence budget by 20%. The defence allocation is shown as 2.557 trillion Pakistani rupees ($9.05 billion), with an actual outlay for the military of $11.45 billion when accounting for military pension. This represents an increase of 17% over the previous year.

Key Takeaways:

  • The defence budget in Pakistan has been increased by 20%, with the actual outlay for the military reaching $11.45 billion, reflecting an increase of 17% over the previous year.
  • The federal development budget has been slashed by half to $3.54 billion, which will likely affect the education and health sectors.
  • Despite pressure from the International Monetary Fund (IMF), agriculture and retail remain outside the tax net, representing the interests of the powerful landed gentry and businessmen.
  • The budget for FY2025-26 projects a sharp increase in GDP growth rate to 4.2%, which will help to minimize the deficit.
  • Two major projects that have escaped cuts are the Diamer-Bhasha dam in Gilgit-Baltistan and highway construction in Balochistan, both driven by strategic considerations.
  • Pakistan's gross financing requirement for FY2025-26 is $19.316 billion, with foreign exchange reserves of $11.5 billion, which are made possible by the rollover of debt service payments.
  • The largest budget item is interest payment, for which a provision of $29.1 billion has been made, exceeding the net revenue of the federal government by a margin of $1.52 billion.

Statistics:

  • Defence allocaton: 2.557 trillion Pakistani rupees ($9.05 billion)
  • Actual outlay for the military: $11.45 billion
  • Increase in defence budget: 20%
  • Federal development budget: $3.54 billion
  • GDP growth rate (projected): 4.2%
  • Gross financing requirement for FY2025-26: $19.316 billion
  • Foreign exchange reserves: $11.5 billion
  • Interest payment provision: $29.1 billion
  • Net revenue of the federal government: $39.23 billion

Sources:

  • World Bank report (no specific date mentioned)
  • International Monetary Fund (IMF) bailout package (no specific date mentioned)
  • Asian Development Bank (ADB) loan (no specific date mentioned)
  • Hindustan Times article by DP Srivastava (no specific date mentioned)