In a defiant move that has raised eyebrows across the global financial landscape, Pakistan has flexed its military muscle with a 15% surge in defense spending for the fiscal year 2024-25.
This audacious hike, amounting to a staggering $7.6 billion, comes as part of a larger $67 billion national budget, reflecting a nation determined to project strength despite its precarious economic predicament.
On June 12th, the Pakistani government unveiled plans for a substantial boost in defense spending, marking a near 15% increase to approximately $7.6 billion (Rs 2,122 billion) for the upcoming fiscal year 2024-25. This surge, part of a larger $67 billion (Rs 18,877 billion) total budget, reflects a significant 14.98% uptick in defense allocations.
Interestingly, despite this fiscal surge, the proportion of the nation’s GDP allocated to defense remains steady at 1.7% for the forthcoming year, maintaining consistency with the previous fiscal term.
However, according to budgetary documents, the current defense budget allocation exceeds the previous year’s allocation of $6.4 billion (Rs 1,804 billion) for the fiscal year 2023-24. Notably, the defense budget for the preceding fiscal year 2022-23 stood at $5.4 billion (Rs 1,523 billion).
Breaking down the 2024-25 defense budget, a total of $7.61 billion (Rs 2,128 billion) has been earmarked for defense affairs and services. This comprises Pak Rs 6.7 billion for defense administration and Pak Rs 2,122 billion for total defense services.
Delving deeper into the allocation, significant portions are dedicated to defense services, including employee-related costs at $2.91 billion (Rs 815 billion), operating expenses at $1.83 billion (Rs 513 billion), physical assets at $1.96 billion (Rs 548 billion), and civil works at $0.87 billion (Rs 244 billion).
Finance Minister Muhammad Aurangzeb unveiled the budget in the National Assembly. It marks the inaugural budget of the Pakistan Muslim League (Nawaz) (PML-N) and Pakistan Peoples Party (PPP) coalition government following the February 8 general elections.
Pakistan’s Def Spending As A Percentage Of GDP
Notably, the Pakistan Economic Survey 2023-24 reveals a downward trend in defense spending as a percentage of GDP since 2020. Despite an increase in the budget, defense spending as a proportion of GDP has consistently decreased, settling at 1.7% for 2024.
It shows that defense spending was 2.6 percent of the GDP in 2020, but it decreased to 2.4 percent in 2021 and further to 2.1 percent in 2022, followed by 1.9 percent in 2023 and 1.7 percent in 2024.
For the year 2025, defense spending has been retained at 1.7 percent of the GDP, showing that there was no change in the portion of the national economy allocated to defense in the overall pie despite it getting more money in the budget.
‘Pakistan Economic Survey’ is a key document showing the budget and performance of the economy each year and is released ahead of the budget each year.
Transparency Of Pakistan’s Defense Budget
Due to historical tensions, the transparency of Pakistan’s defense budget remains a subject of interest, particularly for the Indian defense establishment.
Notably, major acquisitions and expenditures related to the nuclear weapons program, as well as spending on paramilitary forces such as the Pakistani Rangers, Frontier Corps, and Coast Guard, are reportedly excluded from the official defense budget.
Moreover, military assistance received from various countries, including the US and China, is also not incorporated into the official defense budget figures.
Nation In Debt Distress
Amidst this backdrop of military assertiveness, Pakistan finds itself drowning in a sea of debt.
Pakistan’s defense sector expenses rank as the second-largest item in annual expenditure, falling behind debt repayments projected to soar to $35 billion (Rs 9,700 billion) next year.
As per the Pakistan Economic Survey 2023-24, total public debt stood at $241.16 billion (Rs 67,525 billion) by March 2024, with $155.11 billion (Rs 43,432 billion) from domestic sources and $86 billion (Rs 24,093 billion) from external creditors.
Pakistan bears significant debt obligations, with approximately half of its total debt owed to China, Saudi Arabia, and the United Arab Emirates. As a heavily indebted nation, servicing this debt remains its primary expenditure.
Seeks IMF Bailout Amid Economic Crisis
In a desperate bid to stave off economic collapse, Pakistan has turned to the International Monetary Fund (IMF) for a lifeline.
Amid financial challenges, Pakistan is engaging in talks with the International Monetary Fund (IMF) to secure a fresh bailout, aiming to prevent a full-scale economic breakdown. Despite its unstable economic situation, Pakistan has persisted in allocating resources to its military.
However, in May 2024, the IMF conditioned any potential agreement with Islamabad on the approval of the 2024-25 budget by parliament, underscoring the gravity of the nation’s fiscal woes.
Pakistan is negotiating for a loan ranging from $6 billion to $8 billion. Previously, in 2019, Islamabad secured a $6.5 billion three-year agreement with the IMF. Last year, just before the agreement’s expiration, Pakistan received the final $3 billion installment under a standby arrangement.
Key Goals of FY 2024-25 Budget
‘The FY 2024-25 budget of Pakistan is firmly grounded in principles of prudent fiscal management and debt control, aiming to pave the way for economic resurgence and stability,’ as outlined in Pakistan’s Federal Budget 2024-25 document.
The budget sets a few key objectives, which include achieving economic stability and growth through fiscal consolidation, bringing the public debt-to-GDP ratio to sustainable levels, and prioritizing enhancements in the country’s balance of payments.
Additionally, it focuses on bolstering the policy framework to revitalize the private sector, foster entrepreneurship, attract investment, and promote innovation to stimulate economic growth.
China Dominates Pakistan’s Defense Imports
Pakistan heavily relies on imports for its defense spending, with China emerging as its primary partner in recent years. China boasts the largest military budget in the region, at $232 billion this fiscal year, and is Pakistan’s main supplier.
In the past eight years, Pakistan’s military budget has more than doubled, with a significant portion spent on major armaments like fighter aircraft, frigates, submarines, and UAVs, all sourced from China. Pakistan’s shift to Chinese-origin platforms has been rapid over the past decade.
According to SIPRI data, Pakistan is ranked as the world’s fifth-largest arms importer. Between 2019 and 2023, it sourced 82% of its arms imports from China.
SIPRI reports that 61% of all Chinese arms exports from 2019 to 2023 were directed to Pakistan. Key sales include Type 54A frigates, SH 15 155 mm artillery guns, Wing Loong 1 unmanned combat aerial vehicles, WZ 10 attack helicopters, and JF 17 fighter jets.
As EurAsian Times has been reporting, Pakistan aims to further boost its military to counter India and plans to acquire Hangor-class submarines, stealth fighters (JC-31), naval warships, drones, surface-to-air missiles, and other key weapons from China.
In summary, as Pakistan grapples with the intertwined challenges of fiscal stability and military readiness, global attention remains focused on its trajectory.
The question arises: can this delicate equilibrium be maintained, or will the nation’s economic struggles compromise its ambitions for military strength, relegating it to a cycle of debt and diminished international influence?
- Shubhangi Palve is a defense and aerospace journalist. Before joining the EurAsian Times, she worked for E.T. Prime. In this capacity, she focused on covering defense strategies and the defense sector from a financial perspective. She offers over 15 years of extensive experience in the media industry, spanning print, electronic, and online domains.
- Contact the author at shubhapalve (at) gmail (dot) com.
