Budget 2025-26: Pakistan targets 4.2% growth as Aurangzeb presents proposals ‘for a competitive economy'
Finance Minister Muhammad Aurangzeb announced Pakistan's federal budget 2025-26 'for a competitive economy' on Tuesday, targeting a modest 4.2% growth for the coming fiscal year, compared to 2.7% expected in the outgoing FY25.
The budget was announced, amid ruckus from the opposition lawmakers of Pakistan Tehreek-e-Insaf (PTI), with a total outlay of Rs17.6 trillion, down 7% or Rs1.3 trillion as compared to the Rs18.9 trillion budgeted outlay of FY25.
The CPI inflation rate is budgeted to be around 7.5% in FY26, whereas the budget deficit is expected to be around 3.9% of the GDP, while the primary surplus is budgeted at 2.4% of the GDP.
'We are focused on economic stability and prosperity. We want an economy which is equitable and sustainable,' said Aurangzeb in his address.
Talking about the outgoing fiscal, the minister said that the country achieved a surplus of around 2.4% of the GDP in FY25, whereas the CPI rate declined to 4.7%.
'We expect a current account surplus of around $1.5 billion this fiscal,' he said, adding that remittance inflows are expected to hit $37-38 billion in FY25.
On taxation measures, Aurangzeb said that from July onwards, the tax filing process will be simplified.
Aurangzeb, presents the federal budget for the second time as the coalition government seeks to revive the economy, meet the International Monetary Fund (IMF) benchmarks and provide some relief to the tax-weary masses.
Mark-up Payments
Of the total expenditure, Rs8.2 trillion has been allocated for mark-up payments, accounting for 47% of the total government expenditure.
PSDP
The federal government has allocated Rs1 trillion for the Public Sector Development Programme (PSDP).
FBR Tax Target
The Federal Board of Revenue (FBR) is assigned to collect Rs14.13 trillion in FY26, up 19% as compared to Rs11.9 trillion revised estimates for FY25.
The tax collection for FY26 includes Rs6.9 trillion in direct taxes and Rs7.2 trillion in indirect taxes.
Defence budget shoots up
Pakistan has allocated Rs2.55 trillion for defence in the incoming fiscal year, higher than Rs2.1 trillion, i.e. an increase of over 21% allocated in FY25.
Talking about debt management, the finance minister reiterated that the preparation for the issuance of the first Panda Bonds is completed to penetrate the Chinese capital market.
He added that the privatisation process of PIA and the Roosevelt Hotel will be completed in the incoming fiscal year.
Finance Minister Aurangzeb, who is delivering his second budget speech in the National Assembly, will also lay the Finance Bill 2024 in the Senate on the same day, as required under Article 73 of the Constitution.
Ahead of the budget address, the federal cabinet approved the budget proposals for the next fiscal year (2025-26).
Addressing the federal cabinet meeting, Prime Minister Shehbaz Sharif said Pakistan has now come into a take-off position as all economic indicators are satisfactory.
'After defeating India in a conventional war, now we have to surpass it in the economic field as well,' he added.
Some areas of interest:
GDP growth target
External financing estimates
Taxation on the salaried group
PSDP size and focus
Broadening the tax base
Defence budget
The budget comes a day after the government missed its GDP growth target of 3.6% in the outgoing fiscal year, posting a figure of 2.7%, as revealed in the Economic Survey 2024-25.
However, Aurangzeb, during his press briefing while unveiling the Pakistan Economic Survey 2023-24, highlighted a strong 4.8% rebound in industrial activity, pushing the economy's size to $411 billion for the first time and raising per capita income to $1,824.
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