Pakistan's budget reflects a State under the military

According to a recent World Bank report, the poverty rate in Pakistan is above 45%. Pakistan was saved from default by the 25th International Monetary Fund (IMF) bailout package last year.

- DP Srivastava

Amid recent hostilities with India, the IMF made a fresh commitment of $1.4 billion as part of its climate resilience funds. The Asian Development Bank (ADB) has also approved a $800 million loan. These funds are likely to be diverted to defence. It is against this backdrop that Pakistan's budget for fiscal year (FY) 2025-26, presented on Tuesday, has slashed development outlay by 50%, while the defence budget has been increased by 20%.

The budget for FY2025-26 reflects the interests of the military and Pakistan's elite. It has increased the defence outlay, while the overall budget has been reduced by 7%. The defence allocation is shown as 2.557 trillion Pakistani rupees ($9.05 billion). However, this figure does not include the military pension of $2.6 billion. Taking this into account, the actual outlay for the military is $11.65 billion. This represents an increase of 17% over the previous year. While the defence budget has been increased, the federal development budget has been slashed by half to $3.54 billion. This will affect the education and health sectors. Despite pressure from the International Monetary Fund (IMF), agriculture and retail remain outside the tax net, as they represent the interests of the powerful landed gentry and businessmen. Pakistan's budget for the current year ending in June was predicated upon a GDP growth rate of 3.2%. The actual growth rate has been only 2.6%. Surprisingly, the budget for the new year projects a sharp increase in the growth rate to 4.2%. Higher projections help minimise the deficit.