Federal Budget 2025–26 Highlights

Here’s a detailed summary of Pakistan’s Federal Budget 2025–26, presented in the National Assembly on 10 June 2025 by Finance Minister Muhammad Aurangzeb:

1. Overall Fiscal Framework

• Total outlay: ₨ 17.57 trillion (~US$62 billion), marking a 7 % reduction from last year’s ₨ 18.9 trillion (blog.taxationpk.com, reuters.com).
• Fiscal deficit: Targeted at 3.9 % of GDP (down from ~5.9 % last year), with a primary surplus goal of 2.4 % (arabnews.com).
• GDP growth: Projected at 4.2 % (up from estimated 2.7 % in FY25) (brecorder.com).
• Inflation projection: Expected at 7.5 % (brecorder.com).

2. Defence & Security

• Defence spending: Increased by 18–20 % (~₨ 2.55 trillion or ~US$9 billion) (ft.com).
• This hike comes amid heightened tensions and recent military exchanges with India (ft.com).

3. Revenue & Taxation

• Tax-to-GDP target: Set to 14 %, up from below 10 % (tribune.com.pk).
• FBR revenue goal: ₨ 14.13 trillion (~+18.7 %) (brecorder.com).
• Non-tax revenue projected at ₨ 5.15 trillion (brecorder.com).
• Tax reforms:
  • Digitalization of FBR (e-invoicing, AI audits, faceless assessments) (tribune.com.pk).
  • Blocking fake refunds (₨ 9 billion) and fraud detection (₨ 13 billion) (tribune.com.pk).

4. Salaried Class & Tax Relief

• Income tax cuts:
  • For annual income ₨ 600 k–₨ 1.2 m: tax rate halved from 5 % to 2.5 % (arabnews.com).
  • Income up to ₨ 2.2 m: reduced from 15 % to 11 %; ₨ 2.2–3.2 m: from 25 % to 23 % .
  • High earners: 1 % surcharge cut to reduce elite migration (arabnews.com).

5. Debt Servicing & Interest Payments

• Revenue spending:
  • Interest payments: ₨ 8.21 trillion (~47 % of total expenditure), down ~8 % YoY (arabnews.com).
  • Pensions: ₨ 1.05 trillion.

6. Public Sector Development & Subsidies

• PSDP allocation: ₨ 1 trillion, with ~₨ 328 billion for transport (arabnews.com).
• Subsidies (energy, agriculture, etc.): ₨ 1.19 trillion .
• Higher education: ₨ 39.5 billion to the Higher Education Commission .
• Science & tech: ₨ 4.8 billion allocated (brecorder.com).

7. Social Welfare & Human Capital

• Benazir Income Support Programme: ₨ 716 billion (+21 %) (brecorder.com).
• Health & IT:
  • Healthcare: ₨ 32 billion .
  • IT exports goal: US$25 billion over five years; remittances projected at US$38 billion (arabnews.com).

8. Sector-Specific & Structural Reforms

• Agriculture & SMEs: Continued support with focus on SMEs and industrial growth .
• Energy sector: Ongoing WAPDA restructuring; energy tariff adjustments persist (en.wikipedia.org).
• Infrastructure: ₨ 328 billion of PSDP for transport; Cholistan Canal project continues (en.wikipedia.org).

Here is a visual chart of the Pakistan Federal Budget 2025–26 key sectoral allocations in PKR Billion.

9. Context & Drivers

• IMF programme: Part of a broader recovery strategy under a US$7 billion IMF bailout; budget aligns with fiscal consolidation conditions (ft.com).
• Regional security: Defence rise reflecting recent military confrontations with India (ft.com).
• Market reaction: Mixed—some see positives in discipline and tech focus, others concerned by heavy defence bias and cuts in public services .

In Summary

Pakistan’s 2025–26 federal budget charts a course toward fiscal consolidation by cutting overall spending but sharply increasing defence outlays. It includes meaningful tax reforms, relief for the salaried middle class, and significant investment in infrastructure and social programmes—all framed within the constraints of IMF conditions and heightened geopolitical tensions.

Here is the Federal Budget 2025–26 of Pakistan summarized in tabular form for clarity:

Revenue & Taxation

Salaried Class Relief

Major Expenditures

Sectoral & Structural Reforms

Contextual Factors

• ft.com
• apnews.com
• reuters.com

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