Pakistan has raised its defence budget by more than 20 per cent to Rs 2.55 trillion ($9 billion) in the 2025–26 fiscal year, even as the cash-strapped nation slashed overall federal expenditure — including welfare programmes — by 7 per cent, according to an analysis published in Eurasia Review. The surge in military outlays comes as poverty and unemployment continue to rise and the country remains heavily reliant on International Monetary Fund (IMF) funding to avert an economic collapse.

Defence Budget Outpaces Every Other Line Item

Pakistan's 2025–26 defence allocation is reportedly the fastest-growing component of the national budget — and, critically, one whose full details have never been disclosed to elected representatives, according to the Eurasia Review article. The military's outsized influence in Islamabad is widely seen as a key driver of this fiscal asymmetry, with army generals effectively calling the shots on budgetary priorities.

Among the headline programmes is the Hangor submarine initiative, a military-industrial collaboration valued at $4–5 billion and described as one of the most expensive defence procurement projects in Pakistan's history. The Hangor programme alone illustrates the scale of commitment to hardware acquisition at a time when social services are being squeezed.

IMF Austerity Deepens Inequality

The austerity conditions attached to IMF assistance have compounded socioeconomic stress, disproportionately affecting lower-income groups, the article notes. Subsidies and welfare transfers — the primary buffers for Pakistan's most vulnerable citizens — have faced the sharpest cuts even as the military budget expanded at a record pace.

This comes amid a broader structural challenge: Pakistan's tax-to-GDP ratio remains well below regional and global peers, leaving the government with limited fiscal space. Critics argue the resulting trade-off — defence expansion versus social spending — is not an economic inevitability but a deliberate political choice about who bears the cost of adjustment.

Calls for Defence Procurement Accountability

Pressure for greater transparency in military spending is reportedly gaining traction in economic and civil society circles within Pakistan. The central question being raised, according to the Eurasia Review article, is whether allocations of this magnitude — in a country operating under external financial assistance — should face the same scrutiny applied to road contracts, hospital procurement, and social protection schemes.

Notably, defence spending in Pakistan has historically operated outside normal parliamentary oversight, a structural anomaly that critics argue insulates the military from the accountability mechanisms applied to civilian ministries.

Regional Stability Implications

The Eurasia Review article warns that the fragility of the Pakistani state — driven in part by the cumulative fiscal trade-offs that arise when defence spending crowds out human development — poses a potential threat to regional stability. Analysts argue that a state under chronic fiscal stress, with widening inequality and diminished public services, carries risks that extend well beyond its own borders.

With the IMF programme still in force and no structural shift in the civil-military spending balance in sight, Pakistan's fiscal trajectory will remain closely watched by regional governments and international financial institutions alike.