- Austerity, digital tax reforms, export-led economic revival, higher spending on debt servicing, social safety and privatisation efforts in focus
The federal government presented the budget for fiscal year 2025–26 proposing a total outlay of Rs17.573 trillion with a projected budget deficit of Rs6.501 trillion, amounting to 5% of GDP. The 2025-26 budget prioritizes austerity, digital modernization, and export-led growth while expanding social safety nets. Success hinges on effective implementation of privatization and tax reforms.
Major allocations and revenue targets
- Total expenditures for FY26 are estimated at Rs17.573 trillion.
- Gross revenue target is set at Rs19.298 trillion, while net revenue is estimated at Rs11.072 trillion.
- The Federal Board of Revenue (FBR) has been tasked with collecting Rs14.131 trillion in taxes.
- Non-tax revenue target is fixed at Rs5.147 trillion.
- Privatization proceeds are estimated at Rs87 billion.
- Defence spending is proposed at Rs2.550 trillion.
- Current expenditures stand at Rs16.286 trillion, of which:
- Rs8.207 trillion is allocated for interest payments on debt,
- Rs1.055 trillion for pension payments,
- Rs1.928 trillion for grants and provincial transfers,
- Rs1.186 trillion for subsidies, and
- Rs289 billion for emergency and disaster-related spending.
- Development spending
- Total development and net lending is estimated at Rs1.287 trillion, including:
- Rs1 trillion for the Public Sector Development Programme (PSDP),
- Rs287 billion for net lending.
- Economic projections for FY2025-26
- GDP growth target: 4.2%
- Inflation target: 7.5% (annual average)
- Exports target: $35.3 billion
- Imports target: $65.2 billion
- Remittances target: $39.4 billion
- Current account deficit: $2.1 billion, equivalent to -0.5% of GDP
- Total export of goods and services: $44.9 billion
- Total imports of goods and services: $79.2 billion
Budget Summary
Economic Indicators
- – GDP Growth: Projected at 3.9%.
- – Inflation: Targeted at 12.3%.
- – Fiscal Deficit: Aiming for 5.5% of GDP.
- – Tax-to-GDP Ratio: Goal of 10% (currently 8.8%).
FBR Reforms:
- – Digital Transformation: Implementation of AI-driven audit systems, e-invoicing, and digital tracking.
- – Tax Compliance: Measures to reduce tax evasion and broaden the tax base.
Energy Reforms:
- – Circular Debt: Plan to reduce by PKR 389 billion.
- – Tariff Rationalization: Competitive pricing for power distribution.
- – Renewable Energy: Push for solar/wind projects to cut import dependence.
(Oil/Gas Exploration):
- – Energy Security: Offshore exploration bids to reduce import reliance.
- – Tight Gas Incentives: Pricing reforms to attract investment.
Privatization:
- – PIA & DISCOs: Accelerated privatization of Pakistan International Airlines and power distribution companies.
- – Non-Essential SOEs: Divestment of non-strategic state-owned enterprises.
Social Protection & Climate:
- – BISP Expansion: Benazir Income Support Programme coverage increased by 15% for pregnant/lactating women.
- – Climate Resilience: Allocation of PKR 16 billion for climate adaptation (flood management, water conservation)
IT Sector:
- – Digital Governance: E-Government initiatives to improve public service delivery.
- – IT Exports: Target of $25 billion by 2029.
SMEs & Housing:
- – SME Financing: PKR 47 billion allocated for credit access.
- – Affordable Housing: Subsidized mortgage schemes for low-income groups.
Overseas Pakistanis:
- – Remittance Incentives: Simplified banking channels; target of $39.3 billion remittances.
- – Skill Training: Programs for returning expatriates.
SIFC:
- – Special Investment Council: Fast-tracking projects in agriculture, mining, and IT under SIFC oversight.
Water Infrastructure:
- – Dams & Canals: PKR 69 billion for flood control and irrigation efficiency (e.g., K-IV water project).
Health/Education:
- – Healthcare: Upgrading 90 tertiary hospitals; preventive care initiatives.
- – Education: 18.5% budget increase for skill development and ECE programs.
Tax Enforcement:
- – Digital Monitoring: AI tools for tracking e-commerce transactions.
- – Non-Filer Penalties: Stricter enforcement against tax evasion.
Debt Servicing:
- – Debt Management: Liability reduction via buybacks; refinancing high-cost loans.
Summary of Key Budget Measures
Fiscal Discipline & Growth
- – Deficit Target: 5.5% of GDP.
- – Revenue Mobilization: FBR reforms to raise tax-to-GDP ratio to 10% (digital systems, reduced exemptions).
- – Debt Management: PKR 850 billion buyback plan; extend debt maturities.
Sectoral Reforms
- – Energy: Cut circular debt by PKR 389B; tariff reforms; renewable energy push.
- – Privatization: PIA, DISCOs, and non-essential SOEs to be sold.
- – Agriculture: “Green Pakistan Initiative” with PKR 178B for climate-smart farming and e-wallet for subsidies.
- – SMEs/Housing: PKR 47B for SME loans; affordable housing schemes.
Social Protection
- – BISP: 15% expansion for vulnerable women; financial literacy programs.
- – Pensions: Indexation to inflation for federal employees.
- – Health: Upgrading 90 hospitals; PKR 21B for preventive care.
Digital Transformation
- – E-Governance: Unified platforms for public services.
- – IT Exports: Target of $25B by 2029; incentives for tech startups.
- – E-Commerce: “Digital Services Tax” on foreign platforms; SME onboarding.
Infrastructure & Climate
- – Water: PKR 69B for dams/canals; irrigation efficiency projects.
- – Climate Resilience: PKR 16B for flood control; carbon levy on furnace oil.
- – CPEC: Focus on rail/road connectivity under SIFC.
Governance
- – Federal Rightsizing: 10% reduction in non-essential posts.
- – Judicial Reforms: Fast-track courts for tax disputes.
Challenges Addressed:
- – Inflation control (12.3% target).
- – Energy sector inefficiencies.
- – Tax evasion (non-filer penalties).
- – Climate vulnerability.