Pakistan’s Defence Budget: Not Too Much of an Outlier

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After Operation Sindoor, it was widely expected that Pakistan’s defence budget would balloon. The Pakistan Army had successfully fabricated and sold a narrative of its victory in the short, sharp four-day conflict with India, rehabilitating its political and social standing in the process. This meant the Pakistan armed forces could now demand greater funds from the nominal civilian regime without facing serious political resistance or carping sounds over the military’s voracious consumption of national resources.

The salary bill has gone up by just over 3 percent—even though the government announced a 10 percent hike and additional allowances. The numbers are clearly not adding up.

The clash with India, however, also exposed serious vulnerabilities in Pakistan's defences. Not only would the country need to plug the gaps in its defences by procuring new weapon platforms and investing in new technologies, it would also need to replenish and rebuild its arsenal, and repair the damage caused by India. While a 20 percent hike in Pakistan’s defence budget is not as surprising, what is striking is that the increase is not as steep as speculated/anticipated.

A ten-year review of Pakistan’s defence allocations from Fiscal Year (FY) 2016–17 to 2025–26 (See Table 1) reveals some interesting trends/figures. A caveat, however, is in order. The defence allocation is taken as announced in the budget, excluding defence pensions, which are paid from the civilian budget. Adding defence pensions would inflate the defence budget by 25–30 percent. The other latent aspects of the defence spending—expenditures incurred under supplementary heads—also remain excluded in this analysis because there is no way of calculating them from publicly available information.

Table 1: Pakistan Defence Budget and Defence Pensions (All figures in PKR billion)

Source: Budgets for various years.

Considering the last 10 years, the latest budget—i.e., FY25–26—is the first time the defence budget will just about breach the US$9 billion mark, assuming the United States (US) dollar rate remains stable at the current exchange rate. If the Pakistan rupee depreciates, as is being expected, the budget will again fall below US$9 billion. In the past decade, it has dipped below US$7 billion for two years and has generally hovered around US$8-9 billion (see Table 2). Out of the US$9 billion defence budget, US$3 billion will be spent on salaries, US$2.5 billion on operating expenses (up 25 percent), US$1.2 billion on civil works and infrastructure (up 11.5 percent), and US$2.4 billion on military procurement (up 21 percent). Notably, the salary bill has gone up by just over 3 percent, even though the government has announced a 10 percent hike in salaries and a “special relief allowance at the rate of 50 percent to officers and 20 percent to JCOs/soldiers of their basic salary had been granted.” The numbers are clearly not adding up.

Pakistan’s defence expenditure, together with debt servicing, consumes almost the entire revenue earned by the federal government.

As far as the allocations among the various arms are concerned, the Pakistan Army continues to receive the lion’s share of the defence budget (46 percent). The Pakistan Air Force (PAF), which has been far more active in recent skirmishes with India, gets just over 20 percent,  and the Navy around 10 percent. Interestingly, inter-services organisations such as the Inter-Services Intelligence (ISI) and the propaganda arm Inter-Services Public Relations (ISPR) receive almost the same budget as the PAF. Perhaps this is understandable given the stellar role that ISPR plays in spinning narratives of victory even when Pakistan gets a drubbing.

Table 2: Pakistan Defence Budget in US dollars

Source: PBS National Accounts statistics and Budget Documents, various years. The Exchange rate for 2025-26 is taken at the current rate.

In the past four years, since Imran Khan was ousted in April 2022, the defence budget has consistently increased significantly year-on-year. Imran Khan was replaced by a coalition backed by the Pakistan Army and nominally led by the current Prime Minister (PM), Shehbaz Sharif. It gave way to a caretaker regime stacked with loyalists and yes-men of the Army. After the elections in February 2024, the same coalition that had ousted Imran Khan in 2022 was back in power, riding on the shoulders of the Pakistan Army, which had brazenly rigged the elections. While in 2022–23, the defence budget increased by 14 percent, the following year it was raised by 15.4 percent, then 17.6 percent, and now by 20.2 percent. Arguably, the increase in FY25–26 is more or less similar to previous years. However, these figures surged during years of Pakistan's worst economic crisis—when the country was not only on the verge of default, but inflation was almost 40 percent, poverty and unemployment were increasing, and Islamabad was forced into yet another structural adjustment programme with the International Monetary Fund (IMF).

Table 3: Pakistan Defence Budget Increase and as % of GDP, Annual Budget

Source: Pakistan annual budget documents for various years accessed at https://finance.gov.pk. GDP(MP) figures taken from https://www.pbs.gov.pk/sites/default/files/tables/national_accounts/2024-25/Table_2.pdf

Even though the defence budget has been rising fairly significantly year-on-year—it has almost doubled in absolute terms over the past five years—the story is more nuanced when the numbers are seen in relative terms. As a percentage of Pakistan’s total government expenditure, the defence budget has increased after three years, but it is still much lower (under 15 percent) than in the last three years of the previous decade when it stood close to 20 percent. Even as a percentage of the Gross Domestic Product (GDP), it has stayed under 2 percent  in the past three years, though in 2025, it could breach the 2 percent mark. Another interesting factor is that over the past decade, actual defence spending has consistently exceeded budget allocations.

India should be at least four to five times larger than Pakistan in capability and firepower—and still have enough left to deter China.

The burden of defence spending turns out to be much higher when weighed against the revenue earned by the federal government of Pakistan. Although this number has come down in the past 10 years from—from around 40 percent to just over 20 percent of net revenue receipts—Pakistan’s defence expenditure, together  with debt servicing consumes almost the entire revenue earned by its government. This means the fiscal situation is becoming untenable, as virtually every other expenditure is being made from borrowed funds. The problem is further compounded by the fact that, due to fiscal constraints, the government is being forced prune its development spending, which in turn impacts the growth rate. According to some calculations in Pakistan, development spending has a fiscal multiplier effect of two, at least in the short run.

Table 4: Defence Spending as a % of Net Revenue of Federal Govt.

Source: Pakistan annual budget documents, various years, accessed at https://finance.gov.pk

From an Indian point of view, it was a given that Pakistan’s defence budget would go up significantly. Nonetheless, compared to the last fiscal year, the increase—around US$1.5 billion—is not enormous. India’s own defence budget is roughly 10 times that of Pakistan’s. Fiscally, India doesn’t face the same constraints as Pakistan, which is under an IMF programme. That said, Pakistan does try to get more bang for each buck it spends on defence. The fact that it receives the bulk of its military hardware from China also means it can procure new platforms at bargain-basement prices and that too, under generous payment terms. After Operation Sindoor, Pakistan is all set to procure fifth-generation J-35 fighter aircraft, from China. It is also upgrading its air defences with top-of-the-line Chinese systems.

Unlike India, which must confront both Pakistan and its powerful patron, China, Pakistan is entirely focused on India. The security challenges on its western front with Afghanistan and Iran are mostly sub-conventional. While these wars of attrition are enervating, they fail to match up to the challenge India faces in deterring the hostile, rising super-power that is China.

Even as India keeps a close watch on Pakistan's efforts to upgrade and cover the glaring gaps exposed during Operation Sindoor, it must reassess its own defence spending. Considering the huge gap in the defence budgets of the two countries, the fact that on paper the force differential between India and Pakistan is not as wide as it should be needs to be addressed urgently. If not 10 times, India should be at least four to five times larger than Pakistan in terms of capability and firepower—and still have enough left to deter China.

Sushant Sareen is a Senior Fellow at Observer Research Foundation.

• Neighbourhood
• Defence and Security
• India
• Neighbourhood
• Pakistan
• USA and Canada
• india pakistan military conflict
• operation sindoor
• Pakistan Defence Budget
• Pakistan Defence Budget 2025
• Pakistan Defence Budget Hike

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