This year Pakistan is increasing its defense budget by 15 percent (to $6.4 billion). There have been similar increases during the last few years. While Pakistan increases its defense spending every year, to try and keep up with archrival India, it rarely goes up enough to be a real threat to India. These increases are largely due to U.S. aid (over $40 billion) and economic incentives (allowing Pakistani goods into the U.S. at lower customs duties). Before 2001 Pakistan was really struggling to scrounge up the cash to keep its armed forces going. The increases in the past few years have mostly been due to the war against the Taliban in the tribal territories, and Islamic terrorism in general. This war was a self-inflicted wound (Pakistan invented the Taliban in the early 1990s, and began sponsoring Islamic terrorists in the late 1970s). Many of these Islamic militant groups turned on Pakistan when Pakistan was given the choice, after September 11, 2001, to either become an ally of the United States (in the war against Islamic terrorists) or an enemy. It was an offer Pakistan could not refuse but there were expensive consequences. Thus Pakistan insists that American aid is not sufficient to pay for what it costs Pakistan to fight the Islamic terrorists it created. The U.S. rejects this argument, telling Pakistan to take responsibility for what it did to foster Islamic terrorism for decades. Pakistan refuses to admit any fault in this matter.
Then there is India, the traditional enemy. India no longer considers Pakistan the main threat, that role has been taken over by China (a major ally of Pakistan). Despite the terrorist threat, Pakistan has used a lot of the American aid to improve its capabilities against India. But that situation is pretty hopeless. Perhaps noting that, a lot of the additional money for the military went to increasing pay and benefits for the troops. The generals were already rich from what they stole from the budget and American aid. That has been noticed by many less wealthy Pakistanis, thus the raises for the troops.
The true state of Pakistan's defense situation was revealed five years ago when, for the first time in over four decades, Pakistan released information on its defense spending. That year's spending was $4.1 billion. That explains why this data has been kept secret for so long. That's because Pakistan's military rival, and neighbor, India spends far more ($38 billion) on defense. The difference should be no surprise. India has six times the population (at 1.1 billion) and 7.5 times the GDP ($1.1 trillion compared to $145 billion). India's economy has been booming for over a decade, while Pakistan's largely stagnated in comparison.
This military spending disparity has long been suspected, even with the secrecy. The GDP differences were well known, as were the details of how the two forces were equipped. This, of course, is why Pakistan put so much effort into developing nuclear weapons. Only this would provide a credible defense against a foe with superior conventional forces. Pakistan has been spending about three percent of GDP on defense, while India has long been spending two percent (the proposed increase will make it three percent). The global average back then was about 2.5 percent. Now it's closer to 2.8 percent, while Pakistans is a bit over three percent. Most of the most powerful military powers on the planet spend at least three percent of GDP on defense. Pakistan has been spending money it doesn't have, in a vain effort to keep up with its much larger neighbor. Now that India has matched Pakistan's three percent, Pakistan has to seriously consider peace because they can't afford to go above three percent of GDP.
Both nations are dwarfed by the regional superpower, China, which spends nearly $150 billion a year on defense. Pakistan is a major buyer of Chinese weapons, but China does not consider Pakistan a military ally. When it comes to India, Pakistan is on its own as far as China is concerned.