Minister of State for Finance Omar Ayub told parliament the 1,351 billion rupees (22.5 billion dollar) budget provides 435 billion rupees for public sector development, 38 percent more than the previous year.

Opposition MPs briefly staged a walkout after speaker denied them permission to speak on the government's fiscal measures.

Defence gets 250.18 billion rupees up from 223 billion rupees in 2005-6, the minister said in his budget speech. The increase was the lowest in the region, including arch rival India.

"Pakistan is a nuclear power and we will keep providing whatever resources we have to strengthen the defense of the country," he said.

"We will safeguard our nuclear assets at any cost," he said.

"Pakistan's impregnable defence is our priority number one."

Ayub said the government hopes next year's gross domestic product (GDP) will be around seven percent.

In the outgoing year Pakistan recorded a 6.6 percent GDP growth, despite a devastating earthquake in October and world oil price hike.

The government allocated 50 billion rupees for reconstruction and rehabilitation of the victims of the quake that killed 74,000 people and made 3.5 million homeless mainly in Pakistani Kashmir and northwestern regions.

The development programme which is aimed at reducing poverty and improving social and physical infrastructure, will create some 400,000 new jobs, he said.

The fiscal deficit is 4.2 percent of GDP, the minister said.

The gap will be met through external resources and bank borrowing.

Economists said inflation was running at 13 percent and unemployment at nine percent. The minister promised to bring down inflation and offered subsidy on pulses to reduce pressure on common man. He also announced 15 percent increase in salaries and 20 percent in the pension of state employees.

Ayub announced withdrawal of duty on the import of tractors to boost agriculture which absorbs 45 of the country's labour force.

He said the government allocated one billion rupees for the development of the poultry sector and fighting bird flu.

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