In mid-2015 Pakistan announced a new defense budget (for the year beginning July 1st) that would be (at $7.8 billion) 11 percent higher than the current budget. Neighboring India spends over $40 billion a year on Defense. But in one area Pakistan surpasses India and that is the degree to which corruption is involved with defense matters. The most unpopular form of corruption is defense related spending that is not even part of the defense budget. A lot of this money disappears into foreign bank accounts and is considered a fringe benefit by senior officers and civilian defense officials. Another major source of corruption is procurement. India is making progress in reducing this form of waste and theft but in Pakistan journalists still risk death going public with details about this sort of thing that is alive and thriving there.
In 2013 Pakistan increased its defense budget by 15 percent (to $6.4 billion). There have been similar increases since 2010. While Pakistan has always increased 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 recent record increases are largely due to U.S. aid (over $40 billion since 2002) 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 since 2010 have mostly been due to the war against the Taliban in the tribal territories and the expense of dealing with Islamic terrorism in general. This war was a self-inflicted problem as Pakistan created the Taliban in the early 1990s and had begun sponsoring Islamic terrorists in the late 1970s. Many of these Islamic militant groups turned on Pakistan when American told Pakistan, after September 11, 2001, to either become an ally in the war against Islamic terrorists or be considered an enemy. It was an offer Pakistan could not refuse but there were expensive consequences. Thus Pakistan complains that American aid is not sufficient to pay for what it costs Pakistan to fight the Islamic terrorists it created. The U.S. suggests that Pakistan take responsibility for what it did to foster Islamic terrorism but Pakistan refuses to admit any fault in this matter.
Then there is India, the traditional enemy. India no longer considers Pakistan the main threat, a role that 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 since 2002 went to increasing pay and benefits for the troops. The generals were already rich from what they stole from before 2002 (and since, because of American aid). That affluence has been noticed by many less wealthy Pakistanis, thus the raises for the troops. This helps ensure that the troops will remain loyal to their generals, something that cannot be taken for granted in these changing times. Many troops come from families that prefer to see government control over the military while a smaller percentage support Islamic terrorism.
The true state of Pakistan's defense situation was revealed in 2008 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 was (and always has) spending 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 (although that is growing towards three percent because of the Chinese threat). The global average back then was about 2.5 percent. Now it's closer to 2.8 percent, while Pakistan is a bit over three percent. 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 over $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.