Pakistan Looks to Increase Annual Defence Budget Plus

In its upcoming fiscal budget for 2024 to 2025, the Pakistani government proposed allocating PKR 2.12 trillion to the country’s armed forces. If finalized, this would be a 17.6% increase over last year’s defence budget, which stood at PKR 1.804 trillion. Based on the Pakistani Rupee’s value vis-a-vis the U.S. Dollar today, the new budget would amount to $7.61 billion USD, a notable increase over the $6.49 billion USD allocated to the military last year (based on the PKR’s value at the time).

On face value, the forthcoming defence budget will account for 1.7% of GDP and 11.2% of the total fiscal budget. When viewed in PKR, the overall national budget has seen steep increases since 2022-2023, but this year seems to mark the first year of real growth in both domestic and foreign currency terms in some years, at least within the current decade. This is because the PKR’s value relative to the USD held steady over the past year; however, in USD terms, the forthcoming defence budget is still less than the amounts allocated to the armed forces in previous budgets, such as 2017-2018 (when the military had $8.78 billion USD in foreign currency available to it).

In terms of the 2024-2025 defence budget, the Pakistan Army is slated to receive 47.5% of it ($3.61 billion USD), the Pakistan Air Force (PAF) will receive 21.3% ($1.62 billion USD), the Pakistan Navy (PN) will get 10.8% ($821.9 million USD), and 22.3% ($1.70 billion) will go to inter-services organizations. The defence budget will support the following expenses: personnel costs (such as salaries) at 39% ($2.97 billion USD), physical asset costs at 25.8% ($1.96 billion), and operating expenses at 25% ($1.90 billion USD).

Overall, Pakistan’s forthcoming defence budget presents two notable questions: First, is Pakistan’s ability to finance big-ticket armaments increasing or, considering the country’s structural economic challenges, decreasing? Second, can Pakistan manage or control its rising personnel costs?

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For example, Pakistan is actively working towards indigenizing its munitions supply chain, with goals to manufacture surface-to-air missiles (SAM), air-to-air missiles (AAM), precision stand-off range weapons (SOW), and tactical ballistic missiles in the country. As individual units, such munitions generally would cost less than individual platforms (e.g., aircraft); but when multiplied across hundreds or thousands of units, the overall cost of munitions can be significant.

Therefore, the domestic mass production of guided munitions can amount to a major savings in foreign currency for Pakistan. In theory, a growing defence budget in PKR terms could help Pakistan finance a larger number of these munitions and, in turn, improve its warfighting capabilities (by building depth in anti-air or long-range surface strike systems).