By Irtiza Kazmi
KARACHI: Pakistan’s Federal Budget for the fiscal year 2025-26, scheduled for presentation on June 10, 2025, is poised to introduce a series of bold fiscal and structural reforms aimed at steering the country toward sustainable economic growth and macroeconomic stability. According to statements from the Finance Ministry and key economic experts, the budget will not only focus on balancing revenues and expenditures but also emphasize long-term economic resilience and structural transformation.
Strategic Focus on Structural Reforms
The government plans to accelerate reforms in critical sectors such as taxation, energy, and State-Owned Enterprises (SOEs). The budget aims to move away from the traditional consumption-led growth model that has historically led to recurrent balance of payments crises. Instead, it will prioritize export-led growth and fiscal discipline. A significant highlight is the planned privatization of major SOEs, including the relaunch of Pakistan International Airlines (PIA) privatization and the privatization of three power distribution companies by the end of 2025. These moves are expected to improve operational efficiency and reduce fiscal burdens on the government (Finance Ministry, 2025). Debt management reforms will also be a key component, with efforts to modernize debt restructuring processes to lower servicing costs while creating economic value. The government envisions growing Pakistan’s economy to $3 trillion by 2047, addressing challenges such as rapid population growth and climate change through partnerships with international organizations like the World Bank (World Bank Pakistan Economic Update, 2025).
Taxation Reforms and Revenue Mobilization
The 2025-26 budget is expected to introduce sweeping reforms in the tax system to broaden the tax base and enhance compliance. The Finance Ministry has announced plans to simplify tax return filing for salaried taxpayers by reducing the number of data points from approximately 140-150 to just nine, with implementation targeted for September 2025 (Finance Ministry Press Release, May 2025). 2 Additionally, the government aims to bring new categories of income earners into the tax net, including freelancers, YouTubers, vloggers, and other social media influencers, potentially generating an additional Rs500-600 billion in revenue. Pensioners with monthly pensions exceeding Rs400,000 may also be subject to new taxes, expected to raise Rs20-40 billion. Health-related taxes are on the agenda as well, with proposals to impose levies on ultraprocessed food items and increase excise duties on cigarettes and snacks to promote public health awareness. The government is also considering removing the “non-filer” category to restrict non-filers from major economic transactions such as vehicle and real estate purchases. In line with IMF program requirements, the Petroleum Development Levy (PDL) is likely to be increased, including the introduction of levies on furnace oil and a gradual carbon tax on petrol and diesel. These measures could raise between Rs35-80 billion in additional revenues. Furthermore, federal excise duties on fertilizers and pesticides may be increased to encourage sustainable agricultural practices (IMF Staff Report, 2025).
The budget is also expected to remove certain GST exemptions and concessionary rates in specific regions and sectors, with provinces introducing agriculture income taxes. Some relief measures for salaried individuals and the real estate sector are anticipated, along with relaxed import duties and age limits on vehicles and subsidies on housing finance to stimulate economic activity.
IMF Negotiations and Fiscal Discipline
The budget presentation was postponed from June 2 to June 10, 2025, due to ongoing negotiations with the International Monetary Fund (IMF) concerning subsidy caps and fiscal targets. Pakistan remains under the IMF’s Extended Fund Facility (EFF), which imposes strict limits on subsidy expenditures and requires fiscal discipline. The Finance Ministry is working to reconcile budgetary figures with the IMF’s conditions while pursuing reforms aimed at broadening the tax base and reducing fiscal deficits. This balance is critical to maintaining macroeconomic stability and securing continued international financial support.
Support for National Security and Economic Stability
Reflecting national priorities, the budget will ensure continued support for the armed forces amid recent regional tensions. The finance minister has emphasized the importance of export-led growth, noting that Pakistan’s economy has surpassed the $400 billion mark, signalling progress toward economic resilience.
Conclusion
Pakistan’s 2025-26 budget is shaping up to be a landmark fiscal plan characterized by bold reforms, strategic economic planning, and a commitment to fiscal discipline. By focusing on structural reforms, expanding the tax base, accelerating privatization, and modernizing debt management, the government aims to set Pakistan on a sustainable growth trajectory while addressing long-term challenges such as climate change and demographic pressures. The final budget presentation on June 10, 2025, will be closely watched by economists, investors, and international partners as a barometer of Pakistan’s economic direction in the coming years.
