Pakistan is expected to raise its defence budget by about PKR 100 billion in the upcoming fiscal year as the government prepares its budget under an International Monetary Fund (IMF)-backed reform programme that projects a sharp rise in revenues, according to a media report.

The Dawn newspaper, citing the IMF staff report issued after the completion of the third review of the $7 billion Extended Fund Facility (EFF) and the second review of the $1.4 billion Resilience and Sustainability Facility (RSF), reported that defence expenditure for 2026-27 was estimated at Pakistani rupees (PKR) Rs 2.665 trillion, up from PKR 2.564 trillion this year.

The IMF projected Pakistan's total federal revenues for 2026-27 at PKR 17.144 trillion — that's more than PKR 2 trillion higher than the current fiscal year and represents a 13.5% increase, the report said.

It said Pakistan had also committed to increasing the combined expenditure of the federal and provincial governments by 0.2% of GDP to a total of PKR 4.227 trillion, while digitising all federal and provincial government payments by June 2027.

As part of wider reforms linked to the IMF programme, the government will identify the 10 top corruption-prone institutions by the end of this year for detailed analysis and audit. The provincial anti-corruption agencies are also expected to be strengthened.

The government has also given an undertaking not to introduce new incentives for special economic zones, export processing zones, and special technology zones, while phasing out existing incentives by 2035 to create what the report described as a level playing field for all.

The paper said that authorities have maintained that apart from those living in absolute poverty and receiving social income support, around 40% of the population remained economically vulnerable.

An IMF staff mission is currently in Pakistan to finalise budget proposals before the budget 2026-27 is presented to the cabinet and the parliament early next month.