Pakistan’s fiscal year 2025–26 budget sees a bold 20% increase in defence spending amid escalating tensions with India following last month’s conflict, marking a strategic shift in national priorities.

The federal budget, presented on June 10, 2025, notably cuts overall expenditure by 7% to Rs 17.57 trillion ($62 billion), while allocating Rs 2.55 trillion ($9 billion) for the military—up from Rs 2.12 trillion the previous year. This defence outlay remains only about one-ninth of India’s projected $78.7 billion military budget, which itself rose 9.5% in February .

Finance Minister Muhammad Aurangzeb contextualized the boost as a necessary response to recent aerial clashes, including missile and drone exchanges, that brought the nuclear-armed neighbours to the brink of wa. Despite the country's debt-burden—with nearly half the budget servicing interest—the government pressed ahead, expecting widespread parliamentary support.

Pakistan is also reportedly engaging with China over acquisitions of J-35 stealth fighters and advanced air-defence systems. While Prime Minister Shehbaz Sharif framed the move as essential “after defeating India in a conventional war... now we have to go beyond it economically as well,” critics warn that prioritizing defence amid economic hardships—rising inflation and IMF-mandated reforms—could undermine crucial sectors like education, agriculture, and social welfare.