Federal Budget 2025-26 to be presented in National Assembly today
Listen to article
The Federal Budget for the upcoming fiscal year will be presented in the National Assembly today (Tuesday) with discussion to begin June 13 and carry on till June 21.
Finance Minister Muhammad Aurangzeb will present the budget in the Assembly, after which he will lay a copy of the Finance Bill 2025-26, including the Annual Budget Statement, before the Senate for further consideration.
On Monday, Pakistan unveiled its Economic Survey 2024-25, revealing measurable improvement across key indicators, though challenges remain in the agriculture and manufacturing sectors.
The survey showed that the government has managed to consolidate economic recovery by avoiding a "sugar rush" and stabilise the external sector, yet again, it could not meet the most critical targets necessary to give economic growth figures credibility and help increase investment.
Economic growth rate stays at 2.7%, which is a right way to go for sustainable growth in order to avoid boom-bust cycles, said the finance minister, while referring to historical patterns of achieving higher growth rates followed by collapse the next year. However, the claimed growth rate is below the target of 3.6% and is also disputed by independent economists.
Here is a look at its key highlights:
Growth and investment
Real GDP recorded growth of 2.68% in FY2025, underpinned by broad-based stabilization across key macroeconomic indicators. The industrial sector posted 4.77% growth driven by manufacturing recovery, while the services sector expanded 2.91%, maintaining its position as the largest GDP contributor with a 58.40% share.
GDP at current market prices increased to Rs114,692 billion, reflecting a 9.1% increase from the previous year's Rs105,143 billion. The investment-to-GDP ratio reached 13.8% compared to 13.1% in FY2024, while the saving-to-GDP ratio increased to 14.1% from 12.6% last year.
Fiscal performance
The fiscal deficit narrowed to 6.5% of GDP from 7.4% last year. Revenue collection grew 29% to Rs10.8 trillion, with tax revenue increasing 38%. Current expenditures rose 26% due to higher interest payments.
Monetary situation
Inflation declined sharply to a record low of 0.3% in April 2025, down from 17.3% in April 2024. The average CPI inflation for July-April was 4.7%, marking a significant decrease from 26.0% in the same period last year. The State Bank cut policy rates by 450 basis points to 17.5% since July 2024. Broad money supply grew 13.7%.
Agriculture sector
The agriculture sector demonstrated resilience in FY2025, recording growth of 0.56%, primarily driven by livestock performance. The sector's share in GDP declined slightly to 23.54% from 24.03% in FY2024.
Important crops declined by 13.49% due to reduced cultivation area and adverse weather conditions, significantly affecting cotton (-30.7%), wheat (-8.9%), sugarcane (-3.9%), maize (-15.4%), and rice (-1.4%). Cotton production was recorded at 7.08 million bales, sugarcane 84.24 million tonnes, wheat 28.98 million tonnes, and rice at 9.72 million tonnes.
Other crops grew by 4.78%, driven by robust performances in potato (11.5%), onion (15.9%), and mash (4.7%). Cotton ginning lost momentum, declining by 19.03% compared to the growth of 47.23% in the previous year.
The livestock sector, contributing 63.60% to agriculture and 14.97% to Pakistan's GDP, grew by 4.72% in FY2025, up from 4.38% the previous year. The forestry sector recorded growth of 3.03%, maintaining a steady contribution of 2.31% to agriculture and 0.54% to GDP. The fisheries sector grew by 1.42%, improving from 0.81% last year, with a sectoral share of 1.31% in agriculture and 0.31% in GDP.
External sector
Per capita income reached $1,824, up from $1,662 in the previous year, showing a 9.7% increase supported by improved economic activity and a stable exchange rate. The current account recorded a $1.2 billion surplus (0.3% of GDP), while remittances grew 11% to $32 billion. Foreign reserves reached $14.3 billion, covering 3.6 months of imports.
Health and education
Pakistan's health sector showed modest improvements in FY2024- 25, with infant mortality declining to 52 per 1,000 live births from 56 last year, though national health expenditures remained at just 1.4% of GDP. The education sector saw literacy rates rise to 62.8%, while primary school enrollment reached 28.6 million children, yet education spending stayed at 2.1% of GDP, below regional benchmarks.
Technology and infrastructure
The IT sector emerged as a bright spot, with exports surging 32% to $3.5 billion and digital banking transactions growing 89% to Rs12.7 trillion, as mobile broadband penetration reached 57% of the population. Transport infrastructure expanded with road networks growing to 284,772 km and aviation passenger traffic jumping 24%, though rural connectivity gaps persist.
Demographics and labor
Population growth slowed slightly to 2.4%, with urban residents now comprising 40.1% of Pakistan's 241.5 million people, while labor force participation remained stagnant at 37.2%, with significant gender disparities.
"Our digital transformation is accelerating, but human development needs matching investment," Finance Minister Muhammad Aurangzeb told reporters during the survey's launch.
Power sector
Pakistan's installed electricity generation capacity rose to 46,605 MW in FY2024–25, up 1.6% from 45,888 MW last year, according to the Economic Survey.
However, this increase has deepened the burden on consumers, who pay Rs 2.5–2.8 trillion annually in capacity payments to idle power plants producing no electricity.
Debt and Capital Markets
Pakistan's public debt stood at Rs67.8 trillion (74.1% of GDP) by March 2025, marking a 2.3 percentage point decline from last year's 76.4% debt-to-GDP ratio. Domestic debt comprised 61% of the total at Rs41.4 trillion, while external debt accounted for Rs26.4 trillion.
The capital market demonstrated robust growth with market capitalization at the Pakistan Stock Exchange surging 50% to Rs10.2 trillion, while the benchmark KSE-100 index gained 78,000 points during FY2025. Corporate bond issuance increased 38% year-on-year to Rs480 billion.
Manufacturing and Mining
Manufacturing output showed mixed results, with the industrial sector posting 4.77% growth driven by a recovery in manufacturing. Small-scale manufacturing and slaughtering helped offset contractions in large-scale manufacturing (LSM). The auto sector rebounded strongly with 42% production growth, while cement output declined 7.2%.
The mining sector grew 2.1%, with coal production increasing 12% to 10.4 million tonnes. However, mineral exports fell 9% to $682 million due to global price fluctuations. Chromite production dropped 18% while rock salt output grew 5%.
The mixed results come ahead of Tuesday's budget announcement, with observers watching for increased allocations to health and education.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
an hour ago
- Business Recorder
KSE-100 crosses 123,000 level as PSX reacts positively to budget
The Pakistan Stock Exchange (PSX) opened with a bang, as the benchmark KSE-100 Index surged past the 123,000 level during the opening minutes of trading on Wednesday. At 9:40am, the benchmark index was hovering at 123,463.86 level, an increase of 1,439.42 points or 1.18%. Across-the-board buying momentum was observed in key sectors including automobile assemblers, cement, commercial banks, oil and gas exploration companies, OMCs and power generation. Index-heavy stocks including HUBCO, PSO, WAFI, MARI, OGDC, PPL, POL, HBL, MCB, MEBL and UBL traded in the green. The upswing at PSX comes as the government did not announce any 'major changes on taxation', said Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Limited, told Business Recorder. 'Capital gain dividends are retained at 15%,' he added. Finance Minister Muhammad Aurangzeb presented the federal budget 2025-26 to the parliament on Tuesday, with a total outlay of Rs 17.573 trillion, targeting a GDP growth rate of 4.2 per cent against 2.7 per cent in the outgoing year. Aurangzeb termed the budget the start of a strategy to create a competitive economy and economic productivity to increase exports and fundamentally change the economy's DNA. The government has set an inflation target of 7.5% for the next fiscal year. Regarding the fiscal deficit, the government projected a target of 3.9% of the GDP — or Rs5,037 billion — from the outgoing fiscal year's target of 5.9%. The primary surplus is targeted at 2.4% of the GDP against the budgeted 2% in the current fiscal year, which has been revised to 2.2%. Internationally, share markets and the dollar on Wednesday offered a guarded welcome to the latest signs of progress in US-China trade talks, while awaiting more detail of what was decided and whether it would stick for long. Bond investors were also hunkered down for a reading in US inflation that could show the early impact of tariffs on prices, and a Treasury auction that will test demand for the debt. Over in London, negotiators from Washington and Beijing said they had 'agreed a framework on trade' that would be taken back to their leaders. US Commerce Secretary Howard Lutnick added the implementation plan should result in restrictions on rare earths and magnets being resolved, but again offered no specifics. The law was another hurdle as a federal appeals court allowed President Donald Trump's most sweeping tariffs to remain in effect on Tuesday while it reviews a lower court decision blocking them. Investors, who have been badly burned by trade turmoil before, offered a cautious response and MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%. Japan's Nikkei added 0.4% and Australian stocks firmed 0.4%. This is an intra-day update
Express Tribune
3 hours ago
- Express Tribune
PTI tears into 'elite-driven' budget
The Pakistan Tehreek-e-Insaf (PTI) rejected the federal budget 2025-26 both inside and outside the National Assembly on Tuesday, calling it an "IMF-dictated budget" that lacks public legitimacy and launching a two-pronged attack: an aggressive protest on the assembly floor and a pointed press conference soon after. The finance minister's second consecutive budget speech kicked off under fire, with the opposition benches erupting into noisy protest from the get-go. As Finance Minister Muhammad Aurangzeb began unveiling the budget, PTI lawmakers rose to their feet, banged budget books on their desks, blew whistles, and held up posters calling for the release of former prime minister Imran Khan. Throughout the presentation, they chanted slogans against the government, branding the budget illegitimate and anti-people. Undeterred by the uproar, the finance minister pressed on, while treasury members donned headphones to tune out the opposition's noise. Prime Minister Shehbaz Sharif, who entered the house amid the commotion, remained seated and unflinching, as ruling party lawmakers formed a protective cordon around him to avoid any direct clash with the protesting members. Opposition Leader in the National Assembly Omar Ayub Khan led from the front, setting the tone for a coordinated protest and ensuring every PTI lawmaker played their part. Remaining on his feet throughout the session, he repeatedly slammed the budget book on his desk and signalled to fellow members to stay engaged. Lawmakers tore papers and flung them into the air at intervals. After the initial outburst, opposition members moved en masse toward the area between the speaker's desk and the prime minister's seat, continuing their chorus of slogans without letting up. The disruption echoed the tense scenes from last year's budget session, when the finance minister's maiden speech faced an equally turbulent reception from PTI-turned-Sunni Ittehad Council lawmakers. Then as now, the protests included loud chanting, desk-slamming, paper-tearing and close proximity to the PM's seat, prompting treasury members to act as a human shield. Shortly after the session, senior PTI leaders, including NA opposition leader Omar Ayub, PTI Central Information Secretary Sheikh Waqas Akram, PTI Secretary General Salman Akram Raja and Leader of Opposition in Senate Shibli Faraz, addressed a joint press conference, reiterating their categorical rejection of the budget. "This is not a people's budget; it's an IMF budget designed to serve elite interests," the opposition leader said. Ayub questioned the government's economic claims, particularly the projected GDP growth of 2.7%, and sarcastically asked: "Who counted the donkeys and did they differentiate between the four-legged and two-legged ones?" He dismissed the budget as detached from reality, pointing to deepening inequality, inflation and declining industrial output. PTI information secretary was more scathing, calling the budget "economic gallows" for the people, saying it was not a budget for the nation rather a public execution plan. He further said that PTI considers this a "Leela budget" - implying the budget is a farce that ultimately sacrifices common people like goats at slaughter while the elite's interests are protected. He questioned the logic behind token relief for the salaried class and warned that the development allocations were unrealistic and insincere. Opposition leader in the Senate, Shibli Faraz, added that the government had broken all previous records of elitist budgeting. The opposition leader in the Senate said that budgets have been made for the ruling class for decades, but this year's budget has broken all previous records of elite budgeting. Criticising the government, Faraz said: "When such legislation and budget-making takes place in Parliament, it is not just undemocratic but hostile to the country's interest." Faraz also noted that the Afghan currency had appreciated more than the Pakistani rupee, calling it an indicator of the government's failure. "When a government comes to power through Form-47s, it lacks the trust needed for serious reform," he said, warning that economic manipulation without legitimacy would not bring progress. Addressing the media, Faraz condemned the government's handling of inflation and taxation, particularly for salaried individuals. He remarked that the salaried class was being relentlessly squeezed, stating, "as much blood as can be drawn from them is being drawn." He questioned how a country could progress while functioning on what he described as "IMF crutches". Faraz also criticised the state's response to peaceful demands from government employees, noting that when government workers began protesting for their rights, the entire Red Zone of Islamabad was sealed off. "Those who ask for their lawful rights are treated as if they are doing something wrong," he said. PTI secretary general Salman Akram Raja described the document as one that "makes the rich richer and the poor poorer," saying the salaried class and poor people were burdened further. All leaders also reiterated their demand for the release of PTI founder Imran Khan and his wife, describing their incarceration as illegal and politically motivated. They called the ongoing legislative process illegitimate and demanded the restoration of constitutional order, public mandate and rule of law. Earlier, the protest in the assembly followed a detailed strategy discussion in PTI's parliamentary party meeting, held hours before the session. The party rejected the 2025-26 budget outright, terming it a continuation of policies dictated by the IMF. Lawmakers reiterated their stance that the current government had no mandate to present the budget, arguing that it was formed through manipulated election results and did not reflect the will of the people. In its official statement, the PTI parliamentary party declared that the government had no legal or moral authority to legislate on behalf of the public. "This is an IMF budget, not a people's budget," the party said, vowing to resist its passage at every forum, including both the National Assembly and Senate. It condemned the economic hardships faced by ordinary citizens, stating that while the poor were crushed under inflation, the ruling elite continued their lavish lifestyles unchecked. The party also expressed strong disapproval of NA Speaker Sardar Ayaz Sadiq's conduct, accusing him of acting as a partisan figure rather than a neutral custodian of the House. Lawmakers demanded that the speaker act according to his constitutional role rather than serving party interests. It was also decided in the meeting that a privileged motion would be moved if opposition speeches continued to be censored on national broadcasts. PTI lawmakers further resolved to raise the issue of media blackout on their speeches in the assembly and to protest outside if necessary.
Express Tribune
3 hours ago
- Express Tribune
Anti-digital, pro-realty sector budget
Finance Minister Muhammad Aurangzeb on Tuesday unveiled a Rs17.6 trillion budget, which attempted to limit fiscal expansion but taxation measures were clearly self-contradictory that on one hand would promote cash economy and fossil fuels but discourage these too on the other. The government of Prime Minister Shehbaz Sharif also introduced new taxes on the digital economy, pensioners and clean energy. Some of these measures were contradictory to the stated policy to discourage the cash economy. However, the Finance Bill 2025-26, also gave incentives for clean energy by taxing the internal combustion engine cars and fossil fuels. Despite high poverty and high unemployment, the government proposed to drastically reduce import duties from raw materials to finished goods, which the industry feared would lead to de-industrialisation of Pakistan. The economy has been opened for the foreign competition by lowering protection available to local industries. The finance minister said that the maximum custom duty slab has been reduced to 15% while a five-year plan had been given to abolish additional and regulatory duties. The inaudible budget speech, which Aurangzeb, delivered in the midst of rowdy opposition, clearly lacked in giving any policy direction. While the Finance Division tried to meet the International Monetary Fund's (IMF) requirement to meet fiscal targets, the Federal Board of Revenue (FBR) was not able to come up with the clear taxation policy. The Finance Bill 2025-26 appeared to be the most confusing document that any government produced in years. It revolved around going after the economy of the youth and the 21st century business practices. The government has proposed 18% sales tax on import of solar panels but it imposed Rs2.5 per litre carbon levy on use of petrol, diesel and furnace oil, showing the lack of clarity on the part of the government. Likewise, it increased the tax on cash withdrawals from banks from 0.6% to 0.8% to discourage cash economy and generate more easy money but it also imposed a new tax on digital services platforms in the range of 0.25% to 5%. The government also increased sales tax on 850 cc cars of the middle class from 12.5% to 18%. A new tax has been introduced on pensioners where the monthly pension of Rs833,000 has been taxed at the rate of 5%. The FBR was once again lacking in determining the policy, whether the government wanted to promote digital economy or cash economy. FBR Chairman Rashid Langrial cancelled the media briefing on the Finance Bill 2025-26, which was tantamount to compromising transparency and the right of the people to know about the measures that impact their futures. In his budget speech, the finance minister surprisingly stated that the "rapid growth in the online business and digital market places was creating problems for traditional businesses, therefore, it is proposed that e-commerce platforms, couriers and logistic services should be taxed at the rate of 18%. A tax official told The Express Tribune that the FBR would earn Rs64 billion by taxing the digital economy. The Finance Bill 2025-26 showed that the economic managers preferred the 19th century economy by providing some relief on purchase of properties but taxed the digital platforms of the 21st century. It has also proposed to ban economic transactions of ineligible persons, which include ban on purchase of properties, cars and investment in securities by persons whose assets do not match these purchases. Through the Finance Bill, the government also amended a host of other non-tax laws besides introducing two new legislations, the Digital Presence Proceeds Act 2025 and the New Energy Vehicles Adoption Levy Act, 2025. There might be constitutional questions, whether the new laws can be introduced through the Finance Bill. The government has proposed a total of over Rs415 billion worth of tax measures in the budget, said the senior tax official. These include Rs292 billion worth of FBR-related measures, Rs111 billion additional earnings by imposing Rs2.5 per litre carbon levy on petrol, diesel and furnace oil and Rs9 billion worth levy on conventional cars. Finance Minister Aurangzeb said that the IMF had also accepted the Rs389 billion worth enforcement measures. But he admitted that the FBR's tax-to-GDP ratio would remain below the IMF target of 10.6% in this fiscal year. The government has proposed these measures to extract a minimum Rs2.2 trillion from the sluggish economy in a bid to achieve next fiscal year's Rs14.13 trillion tax target. The petroleum and carbon levy target has been set at Rs1.47 trillion for the next fiscal year on the back of Rs80 per litre levy. The finance minister also announced some respite for the lower to middle income group salaried persons. He said that on the annual income of Rs1.2 million, the tax rate will be 2.5%, down from 5%. In the cabinet meeting earlier, there was an exchange of words between the finance minister and the Communication Minister Abdul Alaeem Khan, who had asked the prime minister to further increase the salaries for the government employees. On that the finance minister stated that this would require additional resources, prompting Khan to say that he was not a street vendor, who did not know that this required additional money, said a member of the cabinet on condition of anonymity. The prime minister decided that in order to give a 10% increase in the salaries, the tax rate for the lower middle income group should be increased from the proposed 1% to 2.5%, said the sources. On annual income of up to Rs2.2 million, the government has proposed to reduce the rate from 15% to 11%, on annual income of Rs3.2 million, the rate is reduced from 25% to 23%. There is no relief for the annual salaried income earners of over Rs4.1 million. However, the fine on highest income earners has been reduced from 10% to just 9%, which the finance minister called was necessary to stop "brain drain". Advance tax on sale or transfer of immovable property has been increased from 3% to 4.5% on the value of Rs50 million property. The rate is jacked up to 5% from 3% on Rs100 million property while it is further increased to 5.5% from 4%, if the value exceeds Rs100 million. However, on the purchase of the property the rate is reduced from 3% to 1.5%, from 3.5% to 2% and from 4% to 2.5%, depending upon the value of the property. The economic transactions by the ineligible persons have been banned, if the value of the new purchases is more than 130% of the value of the total assets. Tight fiscal path In order to stay in the IMF programme, the government has proposed a fiscally tight budget, although it created room for political spending too. The government has proposed a budget deficit of Rs6.5 trillion or 5% of the size of the economy. The total size of the budget is Rs17.6 trillion, which is 7.3% less than this year's original budget due to relatively lower allocations for the interest payments in fiscal year 2025-26. The proposed budget deficit is 1.8% of the GDP or Rs2.4 trillion less than the original estimates of this fiscal year. The deficit may still be appearing large in absolute terms. But it is, for the first time, lower than this year's gap, both in terms of size of the economy and in absolute numbers. The defence budget has been proposed at Rs2.55 trillion, which is 21% or Rs436 billion higher than this fiscal year due to war with India. The armed forces development programme has been marginally increased to Rs300 billion, which is far lower than what the military had demanded. The government is projecting gross federal revenues at record Rs19.3 trillion for next fiscal year, higher by Rs1.5 trillion. The gross revenues are based on the FBR's tax target of Rs14.13 trillion and Rs5.2 trillion non-tax revenues. The non-tax income will mainly come from the Petroleum Levy where the government wants to collect nearly Rs1.5 trillion and the Rs2.4 trillion profit by the State Bank of Pakistan. Out of the Rs14.1 trillion FBR tax collections, the provinces will get Rs8.2 trillion as their shares in the federal taxes under the National Finance Commission (NFC) Award. This leaves the federal government with Rs11 trillion net revenues for next fiscal year, which will not be sufficient to meet the interest payments and inclusive of all defence spending. The government will borrow Rs6.5 trillion in the next fiscal year to finance the Rs17.6 trillion total federal budget. Under the IMF programme, the four provinces are also required to save Rs1.46 trillion from their revenues as cash surplus to bring down the national budget deficit to Rs5 trillion or 3.9% of GDP. This is steeper fiscal consolidation and would require all the five governments to meet all their revenue and expenditures related targets. The interest payments will eat 47% of the budget and the federal government's net income —after paying the provincial shares — will be Rs2.8 trillion more than interest payments. The next year's interest payments are estimated at Rs8.2 trillion, which is lower than this fiscal year due to substantial reduction in the interest rates. The finance minister announced a Rs716 billion BISP programme aimed at expanding the net to over 10 million beneficiaries and adding more children in the conditional cash transfer programmes.
