Pakistan Boosts Defence Spending by 20% to $9 bn, Slashes Overall Budget 7% After India Strikes

Pakistan on Tuesday raised its defence expenditure by 20% to $9bn in the annual federal Budget for 2025-26 (FY26) over the preceding year. However, it has slashed overall federal expenditure by 7% for the July-June financial year. This came after India's decisive military action, Operation Sindoor, targeting terrorist camps in Pakistan and Pakistan-occupied-Kashmir.

According to the budget documents, the defence budget increased by over 20% to 2,550bn Pakistani Rupees (PKR), while the country halved its environment protection budget from 7.2 billion PKR to 3.1bn PKR. Pakistan ranks as the eighth most vulnerable country on the Climate Risk Index 2021. The 2022 floods affected around 33mn people and caused nearly $15 bn in damage. Teh world bank also warned that climate-related disasters could shave 18–20% off Pakistan’s gross domestic product (GDP) by 2050.

Another crucial area, health, has seen a drastic reduction from last year’s revised budget of 52.1bn PKR to 31.9bn PKR. This is when Pakistan already spends around 0.8–1.4% of GDP on government health—far below WHO’s recommendation of ≥6%, according to the National Library of Medicines. Its total health spending, including private, is around 2.9% of GDP. Pakistan has only 105,000 nurses for a 248mn population and a doctor‑to‑patient ratio of 1:1300.

Pakistan's this sort of skewed priorities are likely to draw scrutiny from New Delhi, which has long accused Islamabad of diverting financial assistance from multilateral agencies towards unproductive defence expenditure aimed at India.

This defence allocation marks the highest annual increase in over a decade. At PKR 2,550bn, it now constitutes nearly 2% of Pakistan’s GDP—up from the previous year. Defence spending will also make up almost 15% of the total federal budget, setting a new record.

In contrast, India’s defence budget for 2025-2026 was marked at Rs 6.57 lakh crore, nearly nine times Pakistan’s defence outlay and higher than Pakistan’s entire federal budget. However, India’s defence spending, which includes pensions, amounts to merely 1.9% of its GDP.

It is worth mentioning that Islamabad has received a $2.4bn financial aid last month by the International Monetary Fund (IMF), and said that it is committed to preparing FY26 budget “in close consultation with the Fund."