Pakistan's Rs17.6trn budget to be unveiled today
ISLAMABAD: The federal government Tuesday would present budget 2025–26 with an estimated size of Rs17.6 trillion in the National Assembly for debate and approval.
Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb would present federal Budget-2025-26 in the National Assembly. He would also lay the Finance Bill 2024 in the Senate on the same day, as required under Article 73 of the Constitution.
Finance Minister Aurangzeb will deliver his second budget speech in the National Assembly.
According to official sources, the government is projecting gross federal revenues at record Rs19.4 trillion for next fiscal year, higher by Rs1.6 trillion, while the tax collection target is Rs14,130 billion.
The sources said that the proposed breakdown includes direct taxes worth Rs6,450 billion, sales tax revenue of Rs4,900 billion, excise duties of Rs1,150 billion, and Customs duties totaling Rs1,740 billion. Petroleum levy collection is expected to bring in Rs1,311 billion.
They said that non-tax revenue is projected at Rs4,000 billion, and the provincial surplus budget is estimated at Rs1,200 billion.
According to statement issued by National Assembly Secretariat, Speaker National Assembly Sardar Ayaz Sadiq has approved the schedule for the upcoming sessions of the National Assembly regarding the presentation and discussion of the Federal Budget for the fiscal year 2025–26.
The Federal Budget 2025–26 will be presented in the National Assembly on June 10, 2025. The House will remain in recess on June 11 and 12, and the budget debate will commence on June 13, 2025.
Speaker Sadiq stated that all parliamentary parties represented in the National Assembly will be given appropriate time to participate in the budget debate in accordance with the assembly's rules and procedures. The general discussion on the budget will continue until June 21, and the debate will formally conclude on the same day.
There will be no sitting of the House on June 22. On June 23, the National Assembly will hold a discussion on the charged expenditures for the fiscal year 2025–26. This will be followed by debates and voting on Demands for Grants and Cut Motions on June 24 and 25.
The Finance Bill 2025 will be taken up for approval by the National Assembly on June 26, while supplementary grants and other related matters will be discussed and voted on June 27, 2025.
Copyright Business Recorder, 2025
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Rs17.6trn FY26 Budget unveiled under the shadows of IMF conditions, US tariff tensions and war threat
ISLAMABAD: Finance Minister Muhammad Aurangzeb on Tuesday presented the federal budget 2025-26 to the parliament, with a total outlay of Rs17.573 trillion, targeting a GDP growth target of 4.2 percent against 2.7 percent 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 inflation target of 7.5 percent for the next fiscal year. Regarding the fiscal deficit, the government projected a target of 3.9 percent of the GDP — or Rs5,037 billion — from the outgoing fiscal year's target of 5.9 percent. The primary surplus is targeted at 2.4 per cent of the GDP against the budgeted 2 percent in the current fiscal year, which has been revised to 2.2 percent. Pakistan's Rs17.6trn budget to be unveiled today The finance minister stated that it was unavoidable to aim for a 14 percent tax-to-GDP ratio and added that achieving the national targets was 'impossible without the transformation of the Federal Board of Revenue (FBR).' The government has set an ambitious tax collection target for the FBR at Rs14,131 billion, an 8.95 percent increase from the current fiscal year of Rs1,2970 billion and 18.7 percent higher than the revised estimate of Rs11,900 billion. Non-tax revenue is estimated to be Rs5,147 billion for the next fiscal year against the budgeted Rs4,845 billion for the current fiscal year. 'We are providing tax relief to those who need it the most, ie, the salaried class,' Aurangzeb said, noting that the government has decided to significantly reduce tax rates in various income tax slabs. Salaries of government employees were proposed to be raised by 10 percent with a seven percent increase in pensions. The Special Conveyance Allowance of 4,000 rupees monthly for special persons will be increased to 6,000 rupees. Further, 30 percent Disparity Reduction Allowance for deserving government employees has been proposed in the budget. The Armed Forces of Pakistan have rendered exemplary services for the defence of the motherland, said the minister, adding that in recognition of their services, it has been proposed to give a Special Relief Allowance to the officers, JCOs and soldiers of the Armed Forces of Pakistan. These expenditures will be met from the allocated Defence Budget of 2025-26. The federal government has proposed a significant increase in the defence budget for the upcoming fiscal year, allocating a total of Rs2,550 billion. 'The spirit with which we protected our national sovereignty, we need to ensure our financial security in the same way,' he maintained. 'Pakistan has now achieved economic stability and is moving towards a Pakistan that is prosperous,' he added. The minister said for the salaried class falling under the Rs600,000-Rs1.2 million annual tax slab, the government has decided to reduce the tax rate from five per cent to one per cent. Tax amount has been reduced to 6,000 rupees from existing 30,000 rupees on the employees getting 1.2 million rupees, whereas, the income tax rate on those earning between Rs1.2 million-Rs2.2 million has been reduced from 15 per cent to 11 per cent. Those earning between Rs2.2 million-Rs3.2 million are proposed to pay 23 per cent income tax as compared to the current 25 per cent,' he said. Further, the government, in a bid to reduce the ongoing 'brain drain', has decided to reduce the surcharge on those earning over Rs10 million by oneper cent. Aurangzeb said that from July onwards, the tax filing process will be simplified. Talking about relief measures to ease taxes on the corporate sector, Aurangzeb said a reduction of 0.5 per cent in the super tax has been proposed for the corporations generating 200 million to 500 million rupees annual income. He said this concession indicates government's resolve to rationalise the ratio of the corporate tax. The minister said withholding tax on purchase of property is being reduced from four per cent to 2.5 per cent and 3.5 per cent to 2.5 per cent as well as three per cent to 1.5 per cent. He said there is proposal to completely abolish the Federal Excise Duty (FED) up to seven per cent on the transfer of commercial properties, plots and houses to lessen burden on the construction sector. To encourage mortgage for the provision of loan on low-cost housing, tax credit is being introduced on houses up to 10 marlas and flats of 2,000 square feet. He said the government would promote mortgage financing and comprehensive mechanism would be introduced in that regard. Aurangzeb said stamp paper duty on purchase of property in Islamabad Capital Territory would be reduced from four per cent to one per cent so that shortage of houses could be addressed. He expressed the confidences that these measures will accelerate the housing sector, enabling it to play its due role in the economic development of the country. The government, in its bid to promote horizontal equity has proposed to raise tax rate on interest income from 15 per cent to 20 per cent. The government has proposed Rs16,286 billion for current expenditure in the budget for fiscal year 2026 budget, a 5.33 per cent decrease from the outgoing fiscal year. Civil administration expenditure would be Rs0.97 trillion, pension expenditure Rs1.06 billion, power and other sectors Rs1.19 billion. He said 971 billion rupees are being allocated for the civil administration expenditures, while 1,055 billion rupees have been reserved for the pension expenditures. He said 1,186 billion rupees are being earmarked for subsidy on electricity and other sectors. Speaking on tax revenues, he said the tax-to-GDP ratio was only 8.8 per cent in June 2024, which was raised to 10.3 per cent in the first nine months of fiscal year 2025, and would reach 10.4 per cent by the end of June. The government's revenue was now at 11.6 per cent, including the provinces' 0.8 per cent contributions. 'The FBR has increased tax-to-GDP ratio by 1.6 per cent, which is historic not just in Pakistan but the world,' he asserted. The government has announced to end the distinction between filers and non-filers. Only individuals who submit a wealth statement will be allowed to carry out major financial transactions. An 18 per cent sales tax will now be imposed on the import of solar panels to promote local manufacturing. The finance minister said it has been proposed to impose 'carbon levy' at the rate of 2.5 rupees per litre on furnace oil, high-speed diesel and petrol with the aim to discourage the use of fossil fuel and ensure availability of financial resources for climate change and Green Energy programmes. He said this levy will be enhanced to five rupees per litre in the fiscal year 2026-27. The budget also envisages enforcement measures under FED. The finance minister said it has been proposed to seize those items having no barcodes or original tax stamps under Track and Trace System. He said enforcement powers are also being delegated under FED to the particular provincial officers in small cities and rural areas in view of limited presence of FBR. He said this step is especially aimed at effectively curbing the smuggling of non-duty paid cigarettes. New taxation measures include a five per cent income tax on annual pensions exceeding 10 million rupees. The tax on cash withdrawals by non-filers has been increased from 0.6 per cent to one per cent. An 18 per cent sales tax will be imposed on small vehicles up to 850cc, aiming to bring uniformity in sales tax on petrol, diesel, and hybrid vehicles. The government plans to take strict measures against unregistered businesses. Bank accounts of such businesses will be frozen, and there will be a ban on property transfers. In severe cases, business premises can be sealed and goods confiscated. However, businesses will have the right to appeal within 30 days. The finance minister proposed that Balochistan and the merged districts in KP, which 'had a leeway with taxes for the past seven years', were now to pay sales tax starting from 10 per cent for five years. However, noting that the agriculture sector was the economy's engine of growth, Aurangzeb said no further tax on fertiliser and pesticides was being mulled. He warned that those committing theft in sales tax would face strict punishments, with the right to appeal. An automated risk-based income tax adjustment would be introduced to prevent the misuse of the income tax system. He said that foreign vendors from countries having no bilateral tax agreements with Pakistan could be taxed. 'A five per cent tax on items from foreign vendors has been proposed.' Petrol, diesel and hybrid cars that were excluded from an 18 per cent sales tax would now be hit with the same tax as well, the minister said. The government has proposed several tax measures in the federal budget for the financial year 2025-26, aiming to increase revenue and bring various sectors into the tax net. One key decision is to impose tax on e-commerce or online businesses and shoppers, bringing online transactions under the tax umbrella. Individuals or companies selling goods or services through online platforms will be subject to 18 per cent tax, and tax will also be applicable on goods and services ordered online. E-commerce businesses will be required to submit detailed data and tax reports of their monthly transactions to relevant authorities. Additionally, the budget proposes a 25 per cent tax on income earned on debt, while the tax rate on profits earned on shares remains unchanged. The federal government has announced plans to expand the Benazir Income Support Programme (BISP) with a proposed 21 per cent increase in allocation, bringing the total to Rs716 billion. As part of this expansion, the Kafaalat program under BISP will be extended to cover 10 million families, providing financial support to more households in need. The classification of all state-owned enterprises (SOEs) under SOE reforms has been finalised. 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The finance minister said that there was a 31 per cent reduction in electricity prices, as well as 50 per cent reduction in prices for protected consumers. The minister said that the government had made plans to procure cheap energy. Noting the closure of costly power plants and reforms in the oil and gas sector, he said Turkish and other international companies were willing to invest in Pakistan. He mentioned the $5 billion investment pledge by RekoDiq and pointed out fuel price deregulation aimed to promote competition. 'Gold mines in RekoDiq are a key part of our future. The plan's feasibility study was completed in January,' he noted. 'We expect $71 billion in cash flows as well as $7 billion in tax and $8 billion in royalties,' he said, terming the project a 'game changer'. Aurangzeb said additional customs duties will come to an end in four years, regulatory duties will end in five years, Customs Act's Schedule 5 will also be eliminated in five years, and customs duty will be structured in slabs, with the maximum being 15 per cent. 'Tariff reforms will be applied step by step so that businesses can adjust and challenges are reduced. This will apply to all economic areas, including pharma, IT, telecom, textile and engineering.' Aurangzeb said that these instruments would lower the tariffs, bringing them to the same level as Indonesia. The minister said IT exports are projected to reach $25 billion in the next five years. Aurangzeb said that the Small and Medium Enterprise Development Authority had launched a three-year plan for financing small and medium enterprises (SMEs). He said that under the SME risk coverage scheme, 95,000 SMEs had received Rs300 billion in funding till May 2025. He affirmed that the government was taking steps for overseas Pakistanis, including an online system, civil procedure laws to prevent fraud, a quota in chartered medical schools, and civil awards for the top 15 senders. Speaking about the agricultural sector, Aurangzeb said Rs2.64 billion were earned in fiscal year 2024-25, adding that the National Seed Policy 2025 and the National Agri Technology Policy 2025 had been 'nearly approved'. The minister also praised the Strategic Investment and Facilitation Council (SIFC) for taking forward 'strategic Brownfield and Greenfield projects'. 'Inter-provincial and inter-federal connection improved,' he added. Aurangzeb stressed the need for the country to increase its water reservoirs and ensure water security. Under the 2018 National Water Policy, he mentioned the goals of 10m-acre increase in water storage, 35 per cent reduction in water waste and 30 per cent increase in water-use efficiency. He detailed that Rs133 billion would be allocated for projects, Rs34 billion for investment and Rs2 billion for 15 key schemes, detailing the breakdown for various dams. The minister said that the government needed to ensure the provision of cheap energy. He said that 47 schemes and Rs90.2 billion were allocated to the energy sector, including Rs840m for the Tarbela 5th Extension, Rs10.9 billion for the Dasu hydel project, Rs3.5 billion for the 884MW Suki-Kinari Hydropower Project, and Rs35.7 billion for the Mohmand hydel dam. The allocations for other power projects included Rs4.4 billion for the Allama Iqbal Industrial City grid station, Rs1.1bn for the Quaid-i-Azam Business Park, Rs1.6bn for the 100KVA and 200KVA transformers asset performance management system, Rs2.9 billion for the Islamabad Electric Supply Company (IESCO) advanced metering infrastructure, Rs1.8bn for the Multan Electric Power Company (MEPCO), Rs1.9 billion for the Hyderabad, Rs2.4 billion for the Peshawar, Rs67.2bn for the Water and Power Development Authority (Wapda) clean electricity scheme, Rs3bn for five energy schemes of Azad Jammu and Kashmir and Gilgit-Baltistan, and 1.2 billion for GB grids. 'Genetic improvement and post-harvest processes will be focused on,' he said, adding that a total of 1,000 agriculture graduates had been sent to China on government-funded programmes. He also announced five new livestock schemes. 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KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) has criticised the federal budget 2025-26, describing it as a 'more enforcement, less progressive' budget that lacks substantial measures for economic growth. Speaking to the media after the budget announcement by Federal Finance Minister Muhammad Aurangzeb, Chairman Businessmen Group (BMG) Zubair Motiwala, alongside KCCI President Muhammad Jawed Bilwani and other industry representatives, acknowledged the budget's technical soundness but expressed concerns over its limited focus on growth-oriented policies. Motiwala highlighted a significant imbalance in the budget's approach, noting that while import-related incentives have been proposed, there are no corresponding relief measures for exports. 'This is technically a sound budget but measures for economic growth are missing in it,' he stated. The business leader criticised the budget as a 'camouflage' document, suggesting that crucial details would emerge only after implementation. He expressed disappointment that despite the federal minister's emphasis on digitalisation, FBR's strict enforcement, and revenue collection, no attention was paid to exports growth and industrialisation. 'No measures were proposed in this budget for reduction in cost of doing business and cost of production.' Chairman BMG criticised the government for setting overly ambitious goals despite the country's poor economic performance in the previous fiscal year, during which all major targets, including GDP growth and fiscal consolidation, were missed. He questioned the rationale behind increasing the targets without providing any practical explanation of how these would be achieved, especially in a fragile economic environment dominated by uncertainty, high inflation, and IMF-imposed constraints. While acknowledging positive developments such as the reduction in interest rates, current account surplus, and a $2 billion increase in foreign reserves, he criticised the government's decision to increase gas tariffs. 'Prime fuel for export sector is gas and the government is increasing the tariff instead of reducing it.' The KCCI leader expressed disappointment over the agriculture sector's poor performance, which showed a depressing growth of just 0.6 percent against the ambitious target of 13 percent. He also criticized the allocation of only Rs1000 billion for the Public Sector Development Program (PSDP) calling it woefully inadequate, particularly in light of the deteriorating state of infrastructure. 'It is surprising to see a meagre allocation of Rs2.783 billion for climate change in a country which has witnessed increased frequency of climate-related disasters,' he added. While acknowledging that the budget was presented under strict IMF conditions, he said that despite being technically compliant, it fails to address the pressing needs of Pakistan's industrial sector or its citizens. He described the budget as one that may satisfy external lenders but does not offer any practical hope for businesses or the wider population. Vice Chairman BMG Anjum Nisar underscored the importance of establishing a fair and transparent taxation system that does not rely on intimidation or arbitrary enforcement. He warned that the environment being created through the proposed fiscal measures could foster fear among businesses instead of encouraging growth. He said that Karachi remains the economic lifeline of Pakistan and deserves special attention to unlock its full potential. Rather than continuously burdening it with revenue responsibilities, the government should empower it with infrastructure investment and policy support to enable it to contribute even more to the national economy. President KCCI Muhammad Jawed Bilwani rejected the budget, stating it completely failed to offer any meaningful relief to the industrial sector or the general public. He said the government's claim of reduced inflation does not align with the realities faced by households, where electricity bills remain unaffordable and basic necessities are out of reach. He criticised the lack of measures to reduce electricity tariffs and interest rates, which are key drivers of the high cost of doing business. He emphasised that without addressing these core issues, neither industrial expansion nor job creation is possible. The high cost of energy and borrowing has severely impacted the viability of businesses, and without urgent intervention, many enterprises may not survive. Bilwani expressed concern over the government's over-reliance on remittances and IMF programs to manage the economy, calling it an unsustainable and short-sighted approach. He stressed the need to develop a conducive environment for industrial growth, which is the only way to improve key economic indicators. He also criticised the minimal allocation for long-delayed infrastructure projects like K-IV, terming it a sign of the government's disregard for Karachi's needs and its vital contribution to the national economy. Despite repeated demands from the business community, no concrete steps have been taken to broaden the tax net or introduce structural economic reforms, which remain essential for long-term economic stability, he said, raising concerns about agricultural governance, noting that while the sector didn't perform when it was a federal subject, its transfer to provincial governments under the 18th Amendment has not yielded the expected improvements. Calling the entire budget an eye wash, Bilwani expressed frustration over the government's failure to implement serious measures for broadening the tax base, noting that the country continues to rely heavily on home remittances rather than expanding domestic revenue sources. However, not all business associations shared the KCCI's pessimistic assessment. The President of the Karachi Customs Agents Association (KCAA) termed it a 'public friendly budget,' welcoming its potential to provide relief to common citizens, particularly the salaried class. The KCAA president also praised the government's decision to reduce overall customs tariffs to rational levels over the next five years, describing the budget as 'so far so good.' Meanwhile, Mashood Khan, an expert of auto sector said that the FM's budget speech closely mirrors the IMF's recommendations. The downward trend in additional customs duty, regulatory duty and customs duty will likely hit local manufacturing instead of exports in the future, foreseeing severe consequences for our local manufacturing industry. He said that the auto parts and other manufacturing sectors would face significant challenges, urging FM to revisit the budget before seeking approval from the National Assembly. Copyright Business Recorder, 2025
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Rs1trn set aside for PSDP
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