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5d ago

Pakistan Increases Defence Spending by 18% Despite Economic Crisis

The move follows heightened tensions with India, raising concerns over economic reforms and social spending cuts.

Shehbaz Sharif peace talks India Kashmir Operation Sindoor
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Overview

  • Pakistan's defence budget for 2025-26 has been raised by 18% to over Rs 2.5 lakh crore, citing security concerns after the April 22 Pahalgam attack.
  • The country faces severe economic challenges, including inflation exceeding 38%, a debt-to-GDP ratio near 70%, and dwindling foreign reserves at $3 billion.
  • Economists warn that prioritising defence spending and infrastructure projects like the Diamer-Bhasha Dam could undermine social programs and economic reforms.
  • The Diamer-Bhasha Dam, aimed at addressing water security concerns linked to India's upstream dam projects, faces funding and logistical hurdles despite its strategic importance.
  • The IMF recently approved a $1 billion disbursement to Pakistan under its bailout program, but strict fiscal controls remain a condition for further support.