Why US is questioning Pakistan's Rs 3 trillion defence spending

The US State Department has raised concerns about Pakistan's lack of transparency in its defense spending and government debt, according to the 2026 Fiscal Transparency Report. The report, which evaluated Pakistan's financial disclosure practices, found that the military and intelligence budgets remain outside adequate parliamentary or civilian public scrutiny. This means that lawmakers and the public have limited access to information about these expenditures.

The US highlighted three key areas for improvement in Pakistan's fiscal transparency framework. First, the report called for the timely publication of the executive budget proposal, allowing lawmakers and civil society more time to review government spending before adoption. Second, it urged Pakistan to disclose detailed information about government debt obligations, including liabilities related to state-owned enterprises.

Lastly, the US recommended that military and intelligence agency budgets be brought under parliamentary or civilian public oversight.

The report acknowledged some positive aspects of Pakistan's public financial system, such as its supreme audit institution meeting international standards of independence and timely publication of audit reports with substantive findings. However, Pakistan's defense allocation for the 2026-27 fiscal year has risen to Rs 3 trillion, up 17.65% from the previous year. This represents about 2.08% of Pakistan's projected GDP and nearly 16% of the federal government's total outlay.

While military pensions are accounted for separately, the government has allocated Rs 822 billion for retired military personnel under the federal pension outlay. However, the US State Department's assessment emphasizes the distinction between Pakistan's publicly disclosed defense allocation and the wider military spending that may not be fully visible through the country's budgetary documents.