Pakistan Increases Fiscal Space in Budget to Support Essential Defence Needs Amid Regional Tensions

Prime Minister Shehbaz Sharif announced that his administration has expanded fiscal capacity to allocate funds for the military's essential defence needs. On June 10, Pakistan increased its defence budget by 20%, setting aside PKR 2,550 billion (USD 9 billion) for the fiscal year 2025-26 amid ongoing tensions with India. This allocation is second only to the over PKR 8 trillion designated for debt servicing.

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During a Cabinet meeting in Islamabad, Prime Minister Sharif stated, "The government increased the fiscal space to meet the requirements of the valiant armed forces of Pakistan with regard to necessary equipment." Last year, PKR 2,122 billion was allocated for defence, marking a 14.98% rise from the PKR 1,804 billion set for the fiscal year 2023-24.

Budget and Tax Discussions

The prime minister also addressed budget and tax matters, revealing that the government had successfully persuaded the International Monetary Fund (IMF) not to impose taxes on the agriculture sector. This includes avoiding levies on fertiliser and pesticides. He expressed gratitude to the IMF for accepting their request, as reported by Radio Pakistan.

Last week, a PKR 17.5 trillion budget for the fiscal year 2025-26 was unveiled, starting from July 1. It is currently under parliamentary discussion and is anticipated to be approved by the end of this month.

Regional Concerns

Sharif described the situation in the Middle East as alarming, highlighting that the Iran-Israel conflict poses a significant threat to both regional and global peace. He condemned Israeli attacks on Iran as "blatant aggression" and reaffirmed Pakistan's full solidarity with Iran and its people against such actions.

The prime minister strongly denounced Israel's assault on Iran and called upon the international community to strive for an immediate ceasefire. He urged global efforts to address this escalating conflict and restore peace in the region.

The government's decision to increase defence spending reflects its commitment to national security amid regional tensions. Meanwhile, efforts to negotiate favourable terms with international financial institutions indicate a focus on economic stability.

With inputs from PTI