Pakistan has unveiled a 17.6 per cent increase in defence spending for the 2026-27 fiscal year, allocating PKR 3,000 billion. Presenting the budget in the National Assembly on Friday, Finance Minister Muhammad Aurangzeb said, “The government has made a significant increase in the defence budget,” as he outlined a federal budget worth PKR 18,771 billion. The allocation marks a rise from last year's PKR 2,550 billion defence budget, which itself had been 20 per cent higher than the previous year's spending.
Strategic focus on production and exports
Aurangzeb said the budget had been prepared with a “clear and purposeful” strategy aimed at boosting production and exports. “For this reason, we are giving tax concessions to large industries and are providing resources to exporters through the Export Financing Scheme,” he said. He added that the government was seeking to increase revenue through stronger tax enforcement rather than placing additional burdens on taxpayers.
“Given the uncertainty in the region and to ensure the country’s defence, a significant increase has been made in the defence budget,” he said.
Economic targets and major expenditures
The government has set a GDP growth target of 4 per cent for the coming fiscal year, while average inflation is expected to remain at 8.2 per cent. Tax revenues are projected at PKR 15,264 billion, with non-tax revenues estimated at PKR 5,336 billion.
Among the largest expenditures, PKR 8,054 billion has been earmarked for debt servicing and interest payments, while PKR 1,169 billion will go towards pensions and PKR 1,091 billion towards subsidies. The federal Public Sector Development Programme has been allocated PKR 1,000 billion.
Prime Minister Shehbaz Sharif’s remarks
Prime Minister Shehbaz Sharif, who chaired a federal cabinet meeting before the budget presentation, said it was his government's third budget and promised “measures for tax relief and economic progress”. Referring to talks with the International Monetary Fund, he said, “Today, our economy is stable, and we should hope that with this third budget, […] the wheel of our economy will pick up pace on the condition that we collectively work hard around the clock and stand ready to fulfil our responsibilities.”
This budget reflects Pakistan's continued prioritization of defence amid regional tensions, while aiming for fiscal consolidation and growth. The increased allocation underscores the government's commitment to national security, even as it seeks to stabilize the economy through tax reforms and export promotion.
