Pakistan Announces 15% Increase in Defence Budget for 2024-25 Amid Economic Crisis

Pakistan's government has announced a nearly 15% increase in its defence budget for 2024-25, allocating Rs 2,122 billion, while striving to secure a new IMF loan to address external financial liabilities.

On Wednesday, Pakistan unveiled its budget for the fiscal year 2024-25, highlighting a substantial 14.98% increase in defence spending. Finance Minister Muhammad Aurangzeb presented the budget in the National Assembly, the lower house of parliament. This budget marks the first for the coalition government of Pakistan Muslim League (Nawaz) (PML-N) and Pakistan Peoples Party (PPP), which took office following the February 8 general elections.

The defence budget has been set at Rs 2,122 billion, up from Rs 1,804 billion allocated for the previous year, and Rs 1,523 billion the year before that. This increase comes at a time when Pakistan is making strenuous efforts to secure a fresh loan from the International Monetary Fund (IMF) to meet its external liabilities.

Aurangzeb also announced a target GDP growth rate of 3.6% for the next fiscal year, slightly above the 3.5% target set for the current year, which saw only 2.38% actual growth. The total volume of the budget for the coming year is Rs 18,877 billion.

Key Budget Allocations

Defence Spending: Rs 2,122 billion

Debt Payments: Rs 9,700 billion, making it the largest single expense.

Public Sector Development Programme (PSDP): Rs 1,500 billion at the federal level, with a combined provincial and federal PSDP of Rs 3,797 billion.

Economic Goals and Challenges

The government has set an inflation target of 12% and aims to keep the budget deficit at 6.9% of GDP. The tax collection target is ambitious, set at Rs 12,970 billion, which is 38% higher than the previous year. Non-tax revenue is expected to reach Rs 3,587 billion, up from Rs 2,963 billion.

To address the ongoing economic crisis, the government plans to privatize loss-making state-owned enterprises and outsource various airports. These measures are intended to streamline operations and reduce financial burdens on the state.

Development Focus

The budget emphasizes development in several critical areas:

• Agriculture: Transforming the agriculture sector to enhance productivity.
• Information Technology: Promoting IT to boost exports and support industrial growth.
• Business and Industry: Supporting business development to create jobs and stimulate economic activity.
• Social Sector: Prioritizing social development and governance reforms to improve living standards and attract private investment.

Opposition and Future Debates

During the budget presentation, opposition lawmakers from Pakistan Tehreek-e-Insaf (PTI) protested, alleging that the government came to power through electoral fraud. Despite these protests, the budget session was adjourned and a general debate is scheduled to start on June 20, with the budget expected to be passed on June 28.

IMF and Fiscal Policies

The new budget incorporates several IMF pre-conditions, particularly regarding revenue targets, highlighting the government's commitment to securing an IMF bailout package. Without this support, experts agree that Pakistan would struggle to meet its external financial obligations.

The budget preparation took into account both domestic and international economic challenges. It aims to provide a pro-people, business-friendly framework that promotes fiscal consolidation, economic stabilization, and growth. The government plans to enhance tax collection efficiency, broaden the tax base, and implement policies that foster economic prosperity and social development.

Conclusion

Pakistan's 2024-25 budget reflects the government's efforts to balance increased defence spending with economic development and fiscal responsibility. By setting ambitious revenue targets and focusing on critical sectors like agriculture, IT, and business, the government aims to navigate the current economic challenges and lay the groundwork for future growth.