Pakistan plans to utilize a portion of provincial funds to meet its defense requirements over the next three years, Finance Minister Muhammad Aurangzeb announced on Saturday. The statement came after the government unveiled a Rs18.77 trillion ($67.49 billion) federal budget for the next fiscal year, increasing defense spending by approximately 18 percent to Rs3 trillion ($10.8 billion).
Finance Minister's Remarks
Aurangzeb told a post-budget press conference in Islamabad that the arrangement for using provincial funds for defense expenditure is already in place for the current year. He added that discussions are underway to establish a three-year contribution framework. "We are absolutely grateful for all the provinces, the way they have stepped up in helping us for some of the more pressing needs, some of which have been reflected in the defense budget," he said.
Regional Security Context
The increased allocation comes amid a rapidly evolving regional threat environment. Pakistan has been engaged in border skirmishes with Afghanistan over rising militancy in its western regions, while tensions remain high with India following a four-day military conflict in May last year. The government allocated Rs2.55 trillion ($9.17 billion) for defense in the outgoing fiscal year.
Economic Strategy
The cash-strapped government plans to freeze provincial transfers for three years to reallocate resources for security and relief measures. Aurangzeb stated that this approach would put the economy on a path of sustainable, export-led growth. Pakistan expects 4 percent economic growth next year, starting July 1.
Information Minister Attaullah Tarar described the fiscal plan as a "relief-oriented budget." The budget includes tax cuts on exports, salaried individuals, property transfers, and international use of bank cards as part of broader relief measures.
IMF Program Context
The budget comes as Pakistan continues its economic recovery under a $7 billion International Monetary Fund (IMF) program. The program has helped rebuild foreign exchange reserves, reduce inflation, and narrow fiscal imbalances through reforms including higher taxes and spending cuts. When asked how the government secured IMF approval for tax relief, Aurangzeb said, "We are in constant consultation mode. We are taking the program forward with their consultation."
