Pakistan budget tomorrow: Loans climb, poverty worsens, but military set to get more funds

A cobbler waits for customers at his stall in Rawalpindi on June 9, 2025, ahead of the state budget. (Photo by Farooq NAEEM / AFP)

As Pakistan prepares to unveil its deferral budget for the fiscal year 2025 tomorrow, the stakes could not be higher. The country faces an alarming mix of deepening economic instability, soaring public debt, worsening poverty, and inflationary pressures that have eroded the livelihoods of millions. On top of this, Pakistan’s military suffered a significant blow after India’s Operation Sindoor, which targeted key strategic sites, leaving Islamabad scrambling to restore its battered image.

This budget announcement will serve not just as a financial blueprint but as a litmus test of Pakistan’s ability, or inability, to confront its multiple crises with meaningful reforms. However, early indications suggest the government is prioritising defence spending and appeasing foreign creditors over addressing the acute socio-economic hardships faced by its population.

Defence spending set to be increased

The shadow of India’s precision strikes under Operation Sindoor looms large over this year’s budget. The operation exposed critical weaknesses in Pakistan’s military infrastructure, with Indian forces targeting Nur Khan Airbase and other strategic facilities deep inside Pakistan.

In response, Islamabad is expected to boost the defence budget by approximately 18%, the highest jump in recent years, suggest media reports. This sharp increase, coming at a time of economic distress, underscores the misplaced priorities of the Pakistani state. Rather than channelling resources toward economic revival or social welfare, the government appears determined to double down on military spending to cover up its failures and send a message of resilience. This escalation will inevitably squeeze an already strained fiscal space and deepen the country’s financial woes.

Budget designed to satisfy the IMF, not the people

Pakistan’s economic survival is heavily reliant on the International Monetary Fund (IMF), which holds the purse strings for its bailout packages. With previous funding tranches tied to strict conditionalities, the government is expected to roll out austerity measures to meet IMF demands. These will likely include tax hikes, subsidy removals, and spending cuts on public services, all of which will disproportionately hurt the common people.

The IMF’s emphasis on fiscal discipline and structural reforms has forced Pakistan into a corner, where balancing debt repayments and economic growth has become nearly impossible. The government’s submission to IMF priorities rather than the urgent needs of its population reveals the chronic mismanagement that has characterised Pakistan’s economic policies for decades.

The Shehbaz Sharif-led government recently decided to scrap as many as 118 developmental projects valued at Rs 1,000 billion (PKR) from the upcoming 2025-26 Budget, according to local media.

With only PKR 880 billion set aside for the Public Sector Development Programme (PSDP), the Shehbaz Sharif-led administration is under fire for prioritising the military over critical civilian needs in a time of economic crisis.

Growing debt burden

The Economic Survey 2024-25 has starkly highlighted Pakistan’s unprecedented debt levels. Public debt now stands at a staggering PKR 76 trillion (around $269 billion), nearly doubling since 2020-21. This includes Rs 51.5 trillion in domestic debt and Rs 24.4 trillion in external liabilities, primarily owed to international lenders such as the IMF and China.

The surge in debt is not just a number on paper but a ticking time bomb that threatens Pakistan’s fiscal sustainability. Interest payments consume an ever-growing share of the budget, leaving little room for investments in infrastructure, health, or education.

Pakistan’s 2025 budget will likely be remembered as another missed opportunity. The surge in defense spending to cover military humiliation, continued acquiescence to IMF demands, ballooning debt, and failure to alleviate inflation and poverty reveal a country trapped in a cycle of economic mismanagement and strategic overreach.

For millions of Pakistanis, this budget promises little relief and instead signals further hardship. Meanwhile, the government appears focused on propping up an overstretched military apparatus and maintaining fragile external financing, while neglecting the urgent social and economic reforms the nation so desperately needs.