Pakistan boosts defense spending by 17% amid tensions with India

Pakistan has significantly increased its defense spending in its latest budget, citing growing security demands following recent military tensions with India. In contrast, development spending has been curtailed to meet the fiscal discipline conditions set by the International Monetary Fund (IMF).

On Tuesday, Pakistan announced its budget for the 2026 fiscal year, which begins on July 1. The total expenditure is set at $62 billion, with $29 billion allocated for debt financing. The most notable development in the budget is the allocation of $9 billion for defense spending, an increase of approximately 17% from the previous year.

This move comes as Pakistan reassesses its military preparedness following recent conflicts with India. In the four-day conflict that began on May 7, 51 people were killed on the Pakistani side, while at least 16 lost their lives on the Indian side.

Experts have noted that the increase in defense spending was inevitable.

“In Pakistan, the most serious conflict with India in several decades will certainly create an incentive to increase defense spending,” South Asia analyst Michael Kugelman told Nikkei Asia. “The public’s support for efforts against India gives civilian and military leaders the political space to take these steps,” he added.

Some believe the government should allocate even more to defense. One group advocating for this is Tola Associates, a tax advisory and consulting firm. In a recently published budget report, the company stated that defense spending should be increased by 32%. “Due to the state of war with the neighboring country and the recruitment of new army personnel, it is recommended that the defense budget for the 2026 fiscal year be increased to $10 billion,” the report noted.

Other experts argue that the issue is not just about how much the total defense budget will increase. “India’s defense spending remains nearly nine times that of Pakistan,” Syed Muhammad Ali, an Islamabad-based security analyst, told Nikkei. “This large gap indicates that Islamabad wants to deter India credibly and cost-effectively without engaging in a costly arms race in the region.”

Other officials and experts told Nikkei that Pakistan will focus on strengthening its air defense capabilities among its three armed forces.

“Pakistan will purchase HQ-19 missiles from China to strengthen its air defense against future Indian attacks,” a government official, speaking to Nikkei on the condition of anonymity, said. The HQ-19 is a Chinese-made surface-to-air missile system designed to counter medium-range ballistic missiles.

Kugelman said that Pakistan will make decisions on defense spending to strengthen weak areas revealed in the recent conflict, with such air defense systems at the top of the list. “India was able to deploy missiles and drones deep into Pakistani territory, and it did so quite intensively. This is a key area where we can expect some of the funding increase to be directed,” he added.

Ali also believes that air defense and related areas will be a priority. “Contrary to traditional land-air-sea warfare concepts, the role of air and space power, such as beyond-visual-range air combat, electronic warfare, drone warfare, missile warfare, and cyber warfare, is increasingly growing,” he said.

However, Pakistan’s budget is also under strict scrutiny from the IMF, which signed a $7 billion loan agreement with Islamabad last September.

“As Pakistan remains in the 37-month IMF program until 2027, the Fund plays a central role in shaping the budget,” Naafey Sardar, an assistant professor of economics at St. Olaf College in the US, told Nikkei. “Without the IMF’s approval, Pakistan cannot receive the financing tied to the program or support from other multilateral lending institutions,” he added.

“The IMF will push for stricter compliance and a broader tax base. This increases the likelihood of new tax hikes in certain sectors and limited relief for the salaried class,” he stated.

The IMF’s demand for strict budget implementation has led Pakistan to cut its development spending.

In the upcoming budget, Pakistan has allocated $3.5 billion for development expenditures, a sharp decrease of $1.4 billion from the previous budget.

“This cut will further hinder and potentially slow down significant social and infrastructure projects, especially since development spending has repeatedly been the target of budget cuts in recent years to meet IMF program objectives,” Sardar told Nikkei.

“In such a scenario, when the defense budget increases, the [development] budget allocated for health and education decreases,” said Tahir Naeem Malik, a professor at the National University of Modern Languages in Islamabad.

“With a population of 250 million, Pakistan has great needs in these sectors. This creates a contradiction: should the focus be on human development or on defense?” Malik asked.