Islamabad, May 6 (PTI) Pakistan coalition government has endorsed an 18 per cent increase in defence spending to over Rs 2.5 trillion in the next budget due to tensions with India, according to a media report on Tuesday.

The government is set to unveil the 2025-26 budget in the first week of the next month ahead of the start of the new fiscal year from July 1.

India and Pakistan have witnessed heightened tensions since the April 22 terror attack in Jammu and Kashmir's Pahalgam that killed 26 people.

The Express Tribune reported that the Pakistan Peoples Party (PPP) delegation, led by its chief Bilawal Bhutto Zardari, met with Prime Minister Shehbaz Sharif and his economic team to discuss the budget matters on Monday.

The Pakistan Muslim League-Nawaz (PML-N)-led government shared roughly Rs 17.5 trillion worth of new budget framework with its key ally, the PPP, which agreed to 18 per cent increase in the defence outlay.

There was a consensus between the PML-N and the PPP to increase the defence budget due to the recent wave of tensions with India, the newspaper said, quoting sources.

They said that the PPP backed the proposal to increase the defence budget by 18 per cent to over Rs 2.5 trillion in the light of the prevailing security threats.

In the current fiscal 2024-25, the government allocated Rs 2,122 billion for defence spending, reflecting a 14.98 per cent increase over Rs 1,804 billion budgeted for the outgoing fiscal year 2023-24.

The defence sector expenses are the second biggest component of the annual expenditure after the debt payments. In the current year, Rs 9,700 billion allocated for debt servicing constitutes the single biggest expense of the country.

“The size of the budget is lower than Rs 18 trillion, which is less than this year's budget due to steep reduction in the interest expense on the back of an 11 per cent cut in policy rate by the central bank,” the newspaper added.

India on April 23 announced a raft of punitive measures against Pakistan, including suspension of the Indus Waters Treaty, shutting down of the only operational land border crossing at Attari and downgrading of diplomatic ties in view of cross-border links to the attack.

In response, Pakistan shut its airspace to Indian airliners and suspended all trade with India, including through third countries.

Pakistan on Monday conducted a successful training launch of the 'Fatah series' surface-to-surface missile with a range of 120 kilometres while on Saturday, it conducted a successful training launch of the Abdali Weapon System — a surface-to-surface missile with a range of 450 km. PTI SH NPK NPK

Defence spending increase endorsed amid cross-border tensions, reallocating budgetary priorities in the next fiscal budget. An 18 percent increase in the federal defence outlay has been endorsed within the forthcoming budget framework, raising the defence allocation to just over the reported threshold of Rs 2.5 trillion for the next fiscal year. The increase was adopted by the ruling coalition after discussions between the Pakistan Muslim League Nawaz and the Pakistan Peoples Party, which cited heightened cross border tensions and recent security incidents as the principal justification for reallocating fiscal space toward defence. Defence remains the second largest annual expenditure after debt servicing.