Pakistan raises annual defence budget to $8.78 billion U.S.

In its 2017-2018 budget, the Government of Pakistan has budgeted $8.78 billion U.S. (Rs. 920.2 billion) for the armed forces – an increase of $578 million (or 7%) to the budget for 2016-2017.

The allocations are as follow: 24% for operating expenses; 35% for salaries and remuneration; 14% for “civil works” (likely post-conflict reconstruction in the Federally Administered Tribal Areas); and 27% for “physical assets” (likely referring to maintenance). Pensions ($1.7 billion) have been budgeted separately.

The Pakistan Army will receive 47.5% of the budget (i.e. $4.17 billion), while the Pakistan Air Force (PAF) and Pakistan Navy will be provided with 20.5% ($1.8 billion) and 10.7% ($939.46 million), respectively.

The remaining amount, 20.3% ($1.87 billion) will be allotted for defence production, which involves the procurement of arms, such as the JF-17 multi-role fighter, al-Khalid main battle tank (MBT) and others.

Notes & Comments:

Next year’s defence production allocation aligns with IHS Jane’s projection that Pakistan may spend $12 billion in procurement from 2016 to 2024 – i.e. $1.5 billion per year.

Besides regular force increases this part of the budget may include payments for big-ticket programs, such as the eight Hangor-class submarines (the first four will arrive in 2022-2023), four MILGEM Ada corvettes (which will be inked in June), three new Saab 2000-based Erieye airborne early warning and control aircraft, the STM-led Agosta 90B submarine upgrade program and armour upgrade program with Ukraine.

There are additional defence programs on Pakistan’s roadmap. The PAF is expected to issue its first JF-17 Block-III orders in 2017. In 2016, Pakistan had begun assessing new hardware, such as 155mm/52-calibre wheeled self-propelled howitzers, attack helicopters and assault rifles. Pakistan is also aiming to develop a new miniature submarine, light armoured vehicle, guided rockets for multiple launch rocket systems and new munitions. These programs will add to Pakistan’s cash outlay.