SOURCE: AFI
For the fiscal year 2024-25, the Pakistan Air Force (PAF) has been allocated approximately 21.3% of the nation’s total defense budget, amounting to roughly $1.62 billion USD. This figure, while significant, raises eyebrows when juxtaposed against the PAF’s ambitious procurement plans: the acquisition of 40 J-35A stealth fighter jets from China, estimated at $70 million per unit, and participation in Turkey’s KAAN fifth-generation fighter jet program, with each unit carrying a hefty price tag of over $100 million, potentially climbing to $110 million.
The math doesn’t quite add up—purchasing 40 J-35As alone would cost $2.8 billion, far exceeding the PAF’s allocated budget, let alone adding the KAAN’s astronomical costs. So how does a cash-strapped nation like Pakistan, often teetering on the edge of economic collapse, fund such extravagant military upgrades? The answer lies in the Pakistani military’s shadowy financial ecosystem, where official budgets are just the tip of the iceberg, supplemented by a web of unconventional revenue streams ranging from legitimate commercial ventures to illicit black-market dealings.
Pakistan’s defense budget for 2024-25 stands at approximately $7.6 billion USD, reflecting a 15% increase from the previous year. Of this, the PAF’s $1.62 billion allocation is intended to cover operational costs, personnel expenses, and modernization efforts. However, the sheer scale of the PAF’s planned acquisitions—totaling over $3 billion for the J-35As alone, and potentially billions more for the KAAN—suggests that the official budget is insufficient to meet these goals. Even if spread across multiple years, the financial burden far exceeds what the state can reasonably provide, especially given Pakistan’s reliance on IMF bailouts and a foreign exchange reserve hovering around $10 billion. This discrepancy points to a broader reality: the Pakistani military, particularly its powerful army-led establishment, has long operated a parallel economy to fund its ambitions, often bypassing state oversight.
One of the most well-documented sources of extra-budgetary revenue for the Pakistani military is its sprawling network of commercial enterprises. The armed forces manage a vast array of businesses under entities like the Fauji Foundation, Army Welfare Trust (AWT), and the National Logistics Cell (NLC). These organizations operate in sectors as diverse as agriculture, real estate, banking, and manufacturing. For instance, the Fauji Foundation runs fertilizer plants, cement factories, and even a chain of hospitals, generating billions of rupees annually. The AWT oversees ventures like Askari Bank, sugar mills, and stud farms in Pakpattan and Okara, while also dabbling in real estate through housing schemes in cities like Lahore and Islamabad.
These enterprises are not mere side projects—they are highly profitable, tax-exempt conglomerates that funnel revenue directly into military coffers. Estimates suggest that the military’s commercial empire generates upwards of $1-2 billion annually, though exact figures remain opaque due to limited transparency. Agricultural operations, including dairy farms and grain production, further supplement this income, with products often sold domestically or exported through military-controlled channels. This self-sustaining revenue stream allows the military to allocate funds to high-priority projects like fighter jet procurement without relying solely on the state treasury.
Beyond legitimate businesses, the Pakistani military has a long-standing reputation for engaging in less savory activities to bolster its finances. Allegations of shady deals and black-market operations have swirled around the establishment for decades, often tied to its strategic position and regional influence. The military’s Strategic Plans Division (SPD), responsible for overseeing Pakistan’s nuclear and missile programs, reportedly operates a commercial wing that engages in both legal and illicit ventures across the Middle East and beyond. These activities include arms trading, smuggling, and leveraging military connections to secure lucrative contracts.
Reports have surfaced of the military profiting from the black-market sale of goods ranging from weapons to narcotics, particularly in collaboration with regional players. During the Afghan conflict in the 1980s and post-9/11, the military allegedly facilitated the movement of contraband across porous borders, a practice that some analysts believe continues in subtler forms today. More recently, high-ranking generals have been accused of pocketing millions through opaque procurement deals—like the $300 million allegedly skimmed from projects such as the Reqo Diq mining deal and arms purchases—further padding the military’s unofficial budget. These funds, often stashed in offshore accounts or reinvested into military projects, provide a clandestine war chest for acquisitions like the J-35A and KAAN.
The Pakistani military’s financial independence is deeply rooted in its institutional culture. Unlike most modern militaries, which operate strictly under civilian oversight, Pakistan’s armed forces enjoy unparalleled autonomy, a legacy of decades of martial law and political dominance. This autonomy extends to its finances, allowing the military to prioritize its own needs—such as maintaining air superiority over India—over national economic stability. The PAF’s pursuit of fifth-generation jets, despite Pakistan’s crumbling economy, reflects this mindset: the military views itself as the ultimate guarantor of national security, justifying any means to achieve its ends.
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