In its budget for the 2026-2027 fiscal year, the Government of Pakistan has allocated PKR 3 trillion to defence spending, an increase of 17.65% over the original allocation of PKR 2.55 trillion in 2025-2026, which was worth about $9.0 billion U.S. at the time’s exchange rate.[1] Based on the Pakistani Rupee’s (PKR) value against the USD today, the new allocation amounts to about $10.76 billion U.S., the largest defence budget Pakistan has ever set in real dollar terms.
The budget was tabled in the National Assembly on 13 June 2026, marking the second consecutive double-digit increase since the May 2025 conflict with India. Most of the growth is concentrated in the procurement portion of the budget, which rose by almost 40%.[3]
However, the dollar figure depends entirely on the exchange rate, which has fallen substantially. As recently as 2022-2023, the PKR was trading at around 204 to the US Dollar;[4] today it sits near 278.75, i.e. it has lost roughly a quarter of its value in the space of a few years, and a dollar now costs about 37% more PKRs than it did then. The decline was not steady either, as the PKR fell to a record interbank low of 307.1 to the dollar in early September 2023, before a clampdown on the open market and a fresh IMF programme helped it recover close to 11% over the following weeks, briefly making it one of the world’s best-performing currencies that autumn.[5] It has since settled in the high-270s to mid-280s, so the post-2022 recovery is real but modest, and the PKR remains far weaker than before the 2022-2023 crisis.
Measured over a longer period, the decline is larger still. In 2016-2017, the PKR traded at roughly 105 to the dollar,[6] which means it has lost close to two-thirds of its value over the past decade – a dollar today costs more than 2.5 times what it did then. This matters a great deal because the bulk of Pakistan’s procurement is still paid for in foreign currency. The increase measured in PKRs and the actual increase in purchasing power are therefore not the same.
Reading the Budget in Dollars
Measured in PKRs, Pakistan’s defence budget rises in almost every year, so the PKR figure is not the sole indicator of defence procurement capacity. USD must also be factored in as the bulk of Pakistan’s current platform procurement – i.e., fighters, submarines, engines, sensors, and the inputs for its original or locally developed programs – is ultimately priced in foreign currency.
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