In a striking move highlighting its continued prioritisation of military expenditure over public welfare, Pakistan has scrapped over 118 developmental projects worth Rs 1,000 billion (PKR) ahead of its 2025-26 federal Budget. The announcement has drawn sharp focus, particularly as it coincides with an 18% hike in the country’s defence budget, attributed to tensions with India.

With just Rs 880 billion (PKR) now left for Public Sector Development Programmes (PSDP), the decision was confirmed by Planning and Development Minister Ahsan Iqbal, who addressed the media following a key meeting of the Annual Plan Coordination Committee.

Development cut to fund highways and military

The original development budget was Rs 1,000 billion (PKR). However, Prime Minister Shehbaz Sharif diverted Rs 120 billion (PKR) towards upgrading the N-25 Highway in Balochistan, reducing the available funds for public projects.

This shift comes at a time when Pakistan is bound by stringent IMF conditions under its $7-billion loan programme, which requires austerity in spending and greater focus on revenue generation. The IMF has also stressed that Islamabad must tackle its fiscal deficit and ensure debt sustainability.

Despite these concerns, the government has justified an 18% rise in the defence outlay, pushing it to over Rs 2.5 trillion (PKR) for 2025-26.

"Today, [we] have to make difficult decisions about limiting the ongoing projects," Planning Minister Ahsan Iqbal said, underlining the financial crunch Pakistan is battling.

India fear drives military expenditure

The move to boost defence spending has reportedly been influenced by the recent escalation with India, including New Delhi’s suspension of the Indus Waters Treaty and the aftermath of the Pahalgam terror attack. These developments have triggered heightened paranoia in Islamabad, leading to a decision by the PML-N-led coalition government to enhance defence preparedness.

According to Pakistani media, a budget framework worth Rs 17.5 trillion (PKR) has been shared with coalition ally Pakistan People’s Party (PPP), which has agreed to the increase in defence spending.

Meanwhile, sectors like infrastructure, energy, water, transport and planning will get a reduced allocation of Rs 664 billion (PKR). Special regions including Pakistan-occupied Kashmir and Gilgit-Baltistan will get Rs 63 billion (PKR), while merged districts in Khyber-Pakhtunkhwa are allocated Rs 70 billion (PKR).

Minister blames Imran Khan era for current debt trap

Facing widespread criticism, Minister Ahsan Iqbal blamed the previous Imran Khan government (2018-2022) for the fiscal mess. He pointed to excessive borrowings, surging inflation, and a sky-high policy rate of 23%, which has driven debt repayments to consume 55% of current spending.

"Repaying those loans became 55% of our spending. As a result, this has affected our development budget," Iqbal told Dawn, a Pakistan-based daily.

He added that when the PML-N government was voted out in 2018, both development and defence budgets stood at Rs 1 trillion each, reflecting a more balanced allocation.

Now, with defence spending soaring and development slashed, Pakistan's fiscal outlook remains grim, with critics warning of a growing gap between military ambitions and economic reality.

Growth target set amid IMF scrutiny

Despite the funding constraints, Pakistan has set a GDP growth target of 4.2% for 2025-26. However, the IMF estimates it at a more modest 3.6%, with inflation expected at 7.7%.

Minister Iqbal laid out ambitious export and remittance goals, targeting $35 billion in exports and $39 billion in foreign remittances. He claimed remittances had already reached $27 billion in 2022-23, and could jump by $10 billion in 2024-25.

While these figures paint an optimistic picture, Pakistan's reliance on foreign aid, including IMF bailouts and bilateral assistance from friendly nations, indicates a fragile economic base.

Military spending versus citizen welfare

Critics within and outside Pakistan argue that this year’s Budget reflects a dangerous continuation of Islamabad's long-standing trend—prioritising the military while neglecting infrastructure, education, health and welfare.

In fact, the latest military standoff with India is estimated to have cost Pakistan nearly $4 billion a day, according to Pakistani political scientist and economist Farrukh Saleem, who spoke to Arab News last month.

The strategic obsession with India is increasingly proving costly, both in terms of financial resources and public service delivery. With limited fiscal space, observers fear that essential services will deteriorate, worsening the conditions for Pakistan’s struggling population.

Conclusion: Defence at the cost of development

Pakistan’s budgetary choices reflect a clear misalignment between national priorities and citizen needs. At a time when the economy is on the brink, when IMF conditions demand tough fiscal reform, and when infrastructure and public services need urgent attention, Islamabad’s move to slash development spending while escalating military expenditure underscores a deeply flawed policy trajectory.

As the June 10 budget announcement nears, analysts and citizens alike await to see how the final numbers balance out—and whether the development of the Pakistani people will once again be sacrificed for strategic posturing.

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