ISLAMABAD: Pakistan is poised to unveil its federal budget for the fiscal year 2025–26 on June 10, with an estimated total outlay of Rs17.68 trillion. This represents a reduction from the previous fiscal year’s budget of Rs18.7 trillion, reflecting the government’s commitment to fiscal consolidation and economic stabilization.
Key Budget Highlights
- Interest Payments: Approximately Rs8,685 billion is earmarked for servicing domestic and foreign debt.
- Subsidies and Grants: A combined allocation of Rs2,986 billion for subsidies (Rs1,367 billion) and grants (Rs1,619 billion).
- Defence Expenditure: While specific figures are yet to be disclosed, defence spending is anticipated to receive a substantial allocation to ensure national security.
- Social Welfare: The Benazir Income Support Programme (BISP) is projected to receive Rs716 billion, with plans to increase quarterly stipends from Rs13,500 to Rs14,500 by January 2026.
Revenue Generation and Taxation Measures
To bolster revenue streams, the government is considering the following measures:
- General Sales Tax (GST) Adjustment: Proposals to increase the GST rate from 18% to 19%, potentially generating an additional Rs100 billion.
- Petroleum Development Levy: An increase from Rs60 to Rs80 per litre, which could raise fuel prices and contribute to revenue.
- Additional Taxation: Introduction of new taxes on imported goods, including vehicles and mobile phones, to align with International Monetary Fund (IMF) conditions.
Expenditure Control and Austerity Measures
In line with IMF stipulations, the government plans to implement the following austerity measures:
- Ban on New Vehicle Purchases: Federal ministries and departments will be prohibited from acquiring new vehicles.
- Utility Consumption Restrictions: Strict limits on electricity and gas usage across government offices.
- Supplementary Grants: Issuance of supplementary grants will be restricted, with exceptions only for natural disasters.
Economic Growth and Development Initiatives
The budget outlines several initiatives aimed at stimulating economic growth:
- Public Sector Development Programme (PSDP): An allocation of Rs1,500 billion to fund infrastructure and development projects.
- Information Technology Sector: Rs79 billion designated for the IT sector, including Rs8 billion for an IT park in Karachi.
- Agricultural Transformation: Plans to revitalize the agriculture sector through targeted investments and reforms.
Social Sector Enhancements
The government is committed to improving social welfare systems:
- BISP Expansion: Increase in the number of beneficiaries and enhancement of stipend amounts to support vulnerable populations.
- Healthcare and Education: Increased allocations for health and education sectors to improve service delivery.
Debt Management and Financing Strategies
To manage the fiscal deficit and debt obligations:
- Debt Servicing: Rs8,685 billion allocated for debt servicing, with Rs7,503 billion for domestic debt and Rs1,119 billion for foreign debt.
- Privatization Proceeds: The government anticipates generating Rs30 billion through the privatization of state-owned enterprises, such as Pakistan International Airlines (PIA).
- External Financing: Engagement with international financial institutions, including the IMF, to secure funding and technical assistance.
Provincial Contributions and Deficit Management
The federal government expects a surplus of Rs1,220 billion from provincial governments, which will be utilized to offset the projected budget deficit of Rs6,632 billion. This collaborative fiscal approach underscores the importance of intergovernmental coordination in achieving national economic objectives.
The proposed Rs17.68 trillion budget for FY 2025–26 reflects Pakistan’s strategic focus on fiscal prudence, economic growth, and social welfare. While the budgetary allocations indicate a commitment to development and stability, the success of these initiatives will depend on effective implementation, revenue mobilization, and adherence to austerity measures. As the government prepares to present the budget, stakeholders await further details on sector-specific allocations and policy measures.
