Pakistan's finance minister presents the country's next budget that hikes defense spending

ISLAMABAD — Pakistan ’s finance minister on Friday presented the government's new budget to lawmakers, a draft that hikes defense spending by 18% while trimming funding for development programs and offering modest tax reliefs for salaried workers.

The proposal underscores the struggles of Prime Minister Shehbaz Sharif’s government in dealing with slow growth, high living costs and uncertainty amid regional tensions and the war the Middle East.

Pakistan has emerged as a key mediator in bringing Iran and the United States to the negotiating table in efforts to resolve the ongoing war. Talks have stalled, though a tenuous ceasefire is in place.

Pakistan is also embroiled in a conflict with neighboring Afghanistan, accusing Kabul of harboring Pakistani militants who are fighting against the government in Islamabad — a charge Kabul denies. Hundreds of people have been killed since the fighting flared again in February.

Finance Minister Muhammad Aurangzeb told Parliament that under the new budget, total spending would reach 18.77 trillion rupees ($67.49 billion), a slight increase from last year.

Pakistan’s fiscal year 2026-27 begins on July 1. Lawmakers will vote on the proposal later this month.

Aurangzeb said the government is aiming for 4% economic growth and an inflation of 8.2% for the coming year, though price pressures remain a major concern for households already strained by years of rising costs.

The budget closely follows conditions under Pakistan’s ongoing $7 billion program with the International Monetary Fund, which has pushed for higher revenues, broader taxation and structural reforms to reduce chronic fiscal deficits.