The budget session for the fiscal year 2025–26 commenced with National Assembly Speaker Sardar Ayaz Sadiq presiding over the proceedings. Finance Minister Senator Muhammad Aurangzeb presented the Finance Bill, outlining the government’s financial roadmap.
Aurangzeb began his address by acknowledging the challenges faced by the country and stressed the need to secure financial independence with the same resolve used to safeguard national sovereignty. He praised both political and military leadership for their strong stance against Indian aggression, claiming that Pakistan’s firm response had enhanced its global standing.
Key Economic Indicators and Targets
The Finance Minister highlighted the government’s focus on economic revival and public welfare, stating that Pakistan is on a “path of reform and development.”
- GDP growth is projected at 4.2%,
- Inflation is expected to average 7.5%,
- Budget deficit is projected at 3.9% of GDP,
- Primary surplus is forecast at 2.4% of GDP.
Inflation has sharply declined to 4.7%, compared to 29.2% two years ago.
Remittances have reached $31.2 billion, with estimates of $37–38 billion by year-end.
Foreign exchange reserves are expected to reach $14 billion.
Pakistan’s credit rating was upgraded by Fitch Ratings from ‘CCC+’ to ‘B-’, signaling improved investor confidence.
Revenue Collection and Tax Reforms
The Federal Board of Revenue (FBR) has been assigned a tax collection target of Rs14,131 billion. A simplified tax return form—cut down from 800 columns to just 7 key entries—will be introduced from July 1 to assist small businesses.
Aurangzeb noted an “unacceptable” tax gap of Rs5,500 billion, prompting reforms such as:
- Digital production tracking in key industries like cement, beverages, fertilizer, and textiles,
- AI-driven systems for sales and income tax compliance,
- Identification of 390,000 non-filers, leading to Rs78.4 billion in additional revenue.
Privatization, Energy, and Fiscal Discipline
The government’s privatization program is halfway through for three distribution companies. Renegotiated contracts with Independent Power Producers (IPPs) are projected to save Rs3,000 billion.
Aurangzeb announced:
- Closure of all state-run power plants, saving Rs7 billion annually,
- A Rs140 billion reduction in electricity distribution losses,
- New oil and gas discoveries, boosting energy security, with $5 billion in expected investment from E&P companies.
Reko Diq Project and Infrastructure Development
Terming the Reko Diq copper-gold project a “game changer,” Aurangzeb projected:
- A 37-year mining timeline,
- Over $75 billion in cash flows,
- Ongoing construction of road and rail links connecting Reko Diq to Gwadar and Port Qasim.
The maximum customs duty has been capped at 15%. Additionally, Pakistan is set to launch its first Panda Bond, tapping into China’s financial market.
Streamlining Government and Climate Financing
The Cabinet has approved the rightsizing of 10 ministries and merged six divisions into three.
Climate financing has also taken center stage, with Pakistan projected to access $40 billion over the next decade for climate-related projects.
Pension and Salary Reforms
New pension measures include:
- Discouraging early retirements,
- Limiting family pensions to 10 years,
- Eliminating multiple pensions,
- Requiring re-employed retirees to choose between salary and pension.
Technology, SMEs, and Overseas Pakistanis
The government aims to grow IT exports to $25 billion in five years, up from the current $3.1 billion in 10 months.
SME financing has grown from Rs471 billion to Rs641 billion, with a target of Rs1,100 billion by 2028.
For overseas Pakistanis:
- Top 15 remitters will receive civil awards,
- Special courts and online case registration systems will be launched to address their legal needs,
- Educational quotas will be reserved for their children in universities and medical colleges.
Agriculture and Water Security
To support small farmers:
- Collateral-free loans of up to Rs100,000 will be issued via e-wallets,
- A National Seed Development and Authority will be established.
In response to India’s water threats, Aurangzeb announced:
- 10 million acre-feet of new water storage,
- A 33% reduction in water wastage,
- Rs133 billion allocated for water resources, including Rs4.4 billion for Indus Basin telemetry and Rs3.2 billion for Karachi Bulk Water projects.
Energy and Higher Education Spending
For energy:
- Rs90.2 billion will fund 47 schemes.
For education and innovation:
- Rs39.5 billion for 170 HEC projects,
- Rs4.8 billion for 31 science and technology initiatives,
- 300 agriculture graduates will be sent to China this month for training.
New Tax Structure for Salaried Class
A revised income tax structure was introduced:
- Individuals earning up to Rs1.2 million annually will pay 1% tax (approx. Rs6,000),
- Those earning Rs2.2–3.2 million annually will be taxed at 11%.
The government aims to raise the tax-to-GDP ratio to 12.3% in the current fiscal year.
Key Allocations in the 2025–26 Budget
- Total federal expenditure: Rs17,573 billion,
- Public Sector Development Program (PSDP): Rs1,000 billion,
- Including Rs328 billion for transport infrastructure,
- Rs100 billion for Karachi–Chaman carriageway,
- Rs15 billion for Sukkur–Hyderabad,
- Rs35.7 billion for Mohmand Dam,
- Total development expenditure: Rs4,224 billion,
- Defence budget: Rs2,550 billion,
- Pension spending: Rs1,055 billion,
- BISP: Rs716 billion for social support programs.
The Finance Bill 2025–26 reflects the government’s ambitious agenda for fiscal reform, economic revitalization, and long-term development amid internal and external challenges.
