A sharp U.S. diplomatic move by the U.S. targets Pakistan’s most powerful institution — the military. The U.S. has formally asked Pakistan to subject its massive military and intelligence budgets to civilian and parliamentary oversight. The direct request appears in the newly released U.S. State Department’s Fiscal Transparency Report.
The section containing references to Pakistan explicitly flags deep opacity within Pakistan’s defence sector. It reads: “The military and intelligence budgets were not subject to adequate parliamentary or civilian public oversight”.
The report flags THREE structural failures: One, defence and intelligence spending entirely bypass parliamentary review; two, extreme opacity regarding government debt obligations, specifically hidden liabilities tied to major State-owned enterprises; and three, a failure to publish the budget on time, leaving civil society zero room for pre-legislative debate.
Simply put, Pakistan is publishing the numbers alright, but the U.S. is demanding the original receipts!
Why does this bother the U.S. right now? It comes down to timing and leverage. In June, Pakistan proposed a 17.65 per cent hike in its defence budget to a historic 3 trillion Pakistani Rupees or more than 10 billion dollars. This massive hike places military spending above the critical two per cent threshold of the country’s projected G.D.P.
For its part, Pakistan justifies this surge by pointing to a number of factors, including regional-security concerns and the fallout of India’s Operation Sindoor. However, what has really set off alarm bells in Washington, D.C. is that billions in military imports and massive acquisitions remain hidden from the public. Furthermore, Pakistan just signed the Mecca Joint Defence Agreement with Saudi Arabia and Turkiye, indicating expanding defence alignments in the Gulf.
For a nation routinely relying on International Monetary Fund bailouts and Western financial backing, the U.S. believes that billions of dollars cannot simply disappear into an unaudited military black hole. This public calling out is a rare and jarring development in U.S.- Pakistan ties. U.S. President Donald Trump’s Government has maintained a cosy relationship with Pakistan’s military chief, Field Marshal Asim Munir. And yet, by making this critique public via an official State Department report, the U.S. is signalling a complex dual strategy: It is using financial transparency standards to pressure Pakistan’s Generals without cutting direct military-to-military engagement.
This massive 10-billion-dollar military expansion is taking place at a time when Pakistan is actively asking the U.S. for a financial lifeline. Some time ago, Pakistan’s Finance Minister, Muhammad Aurangzeb, travelled to Washington, D.C. and formally requested what is known as a Bilateral Exchange Stabilisation Support Facility from the U.S. Treasury. Pakistan wants a massive cash infusion to shore up its critically low foreign exchange reserves, stabilise the crashing Pakistani Rupee and lessen its gruelling dependence on strict I.M.F. structural programmes. Guess how much Pakistan is asking for? 10 billion dollars! By design or by default, Pakistan just raised its own defence budget to that exact same amount — effectively asking American taxpayers to foot the bill for their military expansion! Has Pakistan received the money yet? No. The U.S. has not officially approved the facility. While Pakistan expects this multi-billion dollar backstop as a diplomatic reward for helping broker recent U.S. — Iran negotiations, Washington, D.C. is leveraging the delay. The State Department’s sudden focus on military transparency signals that U.S. tax-payer funds will not go to a Government that hides its defence spending.
Pakistan’s economy is in systemic crisis and by all rational metrics it cannot afford this massive defence budget. The country is surviving on life-support, trapped in a fragile 7-billion-dollar I.M.F. programme, burdened by soaring public debt, catastrophic energy costs and an inflation crisis that has decimated the middle class. So what’s the catch? How does a nearly-bankrupt State engineer a record-shattering 17.65 per cent increase in military-spending? The maths simply doesn’t add up; unless you look at who actually pays the bill. The catch is a brutal economic trade-off: The Pakistani State is aggressively cutting civilian funding to protect its military budget. Funding for public health, failing educational sectors and crucial climate resilience projects are all being systematically cannibalised to fund defence services. Pakistan’s Government is choosing to tax its poorest citizens on every-day, basic-goods, to maintain an unaudited, off-budget national-security apparatus.
Will this damning U.S. State Department report drive a wedge between the civilian and military wings of the Pakistani State? Domestically, the report has already sparked a fierce sovereignty debate. Many in Pakistan view U.S. intervention as an overreach into internal, national security affairs. However, Pakistan’s Civilian Government headed by Prime Minister Shehbaz Sharif is facing an immense domestic squeeze. In June, hundreds of Government employees protested outside the country’s parliament, furious over rising inflation and stagnant wages. The optics are devastating for Prime Minister Sharif — while the I.M.F. forces citizens to cut back, the military gets a 17.65 per cent budget-hike with NO public scrutiny. If the civilian government pushes for the parliamentary oversight that the U.S. wants, it risks a dangerous clash with a military establishment that historically holds the real levers of power.
The U.S. report makes the following recommendations to Pakistan:
— Publish its proposed budget on time;
— disclose detailed information on government debt obligations, including for State-owned enterprises; and
— subject the military and intelligence budgets to parliamentary or civilian public oversight.
The message from Washington, D.C. is clear: When it comes to the defence budget, transparency is no longer optional.
Ramesh Ramachandran is a senior consulting editor with D.D. India
