Govt Presents Rs18.8 Trillion Budget in Parliament
Finance Minister Muhammad Aurangzeb has presented the federal budget for fiscal year 2026-27 in Parliament, outlining the government’s latest economic roadmap for the next 12 months.
The total federal budget outlay has been set at Rs18.8 trillion.
The budget speech focused on economic recovery, fiscal discipline, tax reforms, digital transformation, energy security, defence readiness and targeted relief for citizens.
The government said Pakistan’s economy has shown signs of recovery after facing inflation, external pressure and regional uncertainty.
According to the speech, GDP growth is expected to reach around 4 percent in FY2026-27. Inflation is targeted between 7.5 percent and 8.2 percent.
The government also highlighted improved foreign exchange reserves, stronger remittances, better current account management and renewed investor confidence.
The finance minister said the budget is designed to support growth while keeping public finances under control.
Salaries, Pensions and Minimum Wage Get Relief
The budget includes relief measures for government employees, pensioners and low-income workers.
Federal government employees will receive a 10 percent salary increase.
Pensions have been increased by 7 percent to help retired employees manage inflation.
The minimum monthly wage has been proposed to rise from Rs37,000 to Rs40,000.
The government said these steps are aimed at supporting household income and improving purchasing power.
The budget also provides tax relief for salaried individuals.
Income tax rates have been reduced across several slabs. Annual income between Rs600,000 and Rs1.2 million will now face a reduced tax rate of 1 percent instead of 5 percent.
Tax rates have also been lowered for higher income brackets up to Rs5.6 million annually.
For pensioners, annual pension income up to Rs10 million will remain tax-free. Pension income above Rs10 million will be taxed at 5 percent.
The government has also removed sales tax on sanitary pads and contraceptives. These products have been recognised as essential health items.
Import duties have also been removed on Active Pharmaceutical Ingredients used in critical disease treatments, including cancer medicines.
Tax Reforms Target Retail, Luxury Imports and Digital Earnings
The budget introduces major tax documentation and enforcement measures.
A fixed tax system has been proposed for small retailers and shopkeepers. Small shopkeepers with annual sales below Rs10 million will pay 0.5 percent of annual sales as tax.
A separate fixed tax scheme has also been announced for retailers with annual sales up to Rs200 million.
Under this scheme, eligible retailers will pay either a minimum tax of Rs25,000 per year or 1 percent of sales.
The government has also introduced withholding tax on income from digital platforms such as YouTube, Instagram and TikTok. Banks will deduct the tax at source.
Luxury imports have also been targeted.
The budget proposes higher duties on imported cars, SUVs and vehicles above 2000cc engine capacity. Electric vehicles valued above Rs20 million will also face new duties.
For the vaping sector, Federal Excise Duty on e-liquids has been increased from Rs10,000 per kilogram to Rs16,500 per kilogram.
The earlier retail-price-based tariff of up to 65 percent has been removed.
The budget also proposes new tax treatment for short-term insurance and takaful payouts. Death claims, disability benefits and long-term payouts will remain exempt.
Digital Economy, Energy and Development Remain Key Priorities
The government has placed strong focus on digital transformation.
The budget speech highlighted Federal Board of Revenue reforms, including digital monitoring, artificial intelligence tools, real-time production monitoring and faceless customs assessment.
A National Faceless Centre will be established to reduce direct contact between taxpayers and officials.
The government said this reform will improve transparency, reduce corruption and strengthen tax compliance.
Pakistan’s 5G spectrum auction is also planned under the digital economy agenda.
The National Artificial Intelligence Policy has been finalised to support innovation, startups and future-ready skills.
The budget also includes the Pakistan Accelerated Vehicle Electrification Program. It will support electric motorcycles, rickshaws and other electric vehicles through subsidised financing.
A nationwide fan replacement program will also be launched to reduce electricity consumption and lower pressure on the national grid.
In the development sector, the Public Sector Development Program will focus on transport, energy, water, education, health, technology and special regions.
Funds have also been allocated for Azad Jammu and Kashmir, Gilgit-Baltistan and newly merged districts.
The government has reaffirmed its commitment to the 5Es framework, covering exports, digital Pakistan, environment, energy and equity.
The speech concluded with a focus on reform implementation, national unity and sustainable economic growth.
