Pakistan’s budget for 2025-26 includes an 18% increase in defense spending to over Rs 2.5 lakh crore, raising concerns about fiscal priorities amid economic challenges and inflation exceeding 38%. Economists warn this allocation, intended to address tensions with India, may hinder economic reforms and social spending, with the government simultaneously pursuing costly infrastructure projects like the $14bn Diamer-Bhasha Dam. Analysts highlight the risks of diverting funds from social needs, as Pakistan grapples with a high debt-to-GDP ratio and tight fiscal space under IMF scrutiny.
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