Ending the three-year freeze on its defence spending, Pakistan on Saturday increased its defence allocation by seven per cent amid projections of 6.4 per cent growth rate in its overall economy this year.

Pakistan Finance Minister Shoukat Aziz presented the budget for the 2004-2005 fiscal amid a token walkout by the opposition, which accused the minister of fudging figures to improve the government's image.

The increase in the defence budget from $2.8billion to $3.4billion, which amounts to 21.7 per cent of Pakistan's total budget, comes at a time when relations with India are improving.

Government officials explained that the increase was necessitated by the large-scale deployment of military forces in the troubled tribal areas bordering Afghanistan to flush out Al Qaeda militants.

Officials in Islamabad also argue that Pakistan needs extra money in its fight against the rising tide of domestic terrorism, which caused severe disruptions in its trade capital Karachi.

There was marginal increase of four per cent in last year's budget, which was attributed to rise in expenditure to meet the cost of troop mobilisation after India increased troops on its border after the attack on Parliament in