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Business Recorder
21 hours ago
- Business
- Business Recorder
Balancing the books and the battlefield: Pakistan's fiscal strategy for FY2025–26—III
With an eye on long-term innovation, Rs?79?billion is dedicated to the IT sector. Major developments include the Karachi IT Park, Islamabad Technology Park, and a national freelancing platform. The government also aims to scale up IT exports, which have already grown 21 percent year-on-year. Small and medium-sized enterprises (SMEs) will benefit from increased access to low-cost financing and enhanced risk coverage. Over Rs 300 billion has already been disbursed to 95,000 businesses, with the government planning to double this outreach through new policy tools and financial instruments. Remittances—Pakistan's most stable source of foreign exchange—rose to USD 38.3 billion last year, a remarkable 27 percent year-on-year increase. Enhanced services for overseas Pakistanis, such as secure digital transfers, diaspora awards, and legal protections, are helping cement trust and sustain these vital inflows. These remittances serve as a bulwark against external imbalances and are instrumental in maintaining the State Bank's foreign exchange reserves, which currently stand at a reassuring USD?14 billion. The export target for FY2025–26 is set at USD 35.3 billion—a 7.4 percent increase—while imports are expected to grow to USD?65.2?billion. This will result in a trade deficit of nearly USD 30 billion, which the government plans to offset through robust remittance inflows and foreign direct investment. Exporters, especially in textiles, IT, and rice, will benefit from zero-rated tax regimes, tariff rationalization, and simplified refund systems. A newly proposed Tariff Reform Package aims to reduce maximum duty rates to 15 percent within four years, enhancing global competitiveness and easing the burden on domestic producers. Muhammad Sheroz Khan Lodhi (Karachi) Copyright Business Recorder, 2025
Business Recorder
2 days ago
- Business
- Business Recorder
Balancing the books and the battlefield: Pakistan's fiscal strategy for FY2025-26
While public spending contracts, the Public Sector Development Programme (PSDP) remains protected approaching Rs 1.15 trillion through targeted public-private partnerships. Of this, Rs 253 billion is allocated to energy infrastructure, Rs 79 billion to transport and highways, and Rs 206 billion to vital water conservation and irrigation initiatives. Mega-hydropower projects like Dasu, Mohmand, Tarbela-V, and Suki Kinari are prioritized, alongside upgrades to the national transmission grid. These investments aim to reduce circular debt, enhance industrial productivity, and fortify Pakistan's resilience against climate-related shocks, an increasingly pressing national concern. A 5 billion rupees 'Kisan Package,' along with duty waivers on seeds and tax concessions for farm equipment, is expected to stimulate a 4.5 percent growth in agriculture. The support comes at a critical time as Pakistan faces recurring challenges of food inflation and climate-induced crop disruptions. Education receives over Rs 100 billion, with focused investments in federal universities, vocational training, and digital literacy. Meanwhile, healthcare spending approaches Rs 80 billion, earmarked for maternal and child health, expanded immunization programs, and construction of new hospitals in Islamabad and underserved region. Balancing the books and the battlefield: Pakistan's fiscal strategy for FY2025–26—I Civil servants are granted a 7.5–10 percent salary increase, while pension reforms shift towards a contributory model—an essential measure to contain the growing fiscal burden exceeding Rs 1 trillion annually. The salaried class—long burdened by inflation and stagnant wage growth—receives modest but meaningful relief in this year's budget. The government has revised tax slabs for salaried individuals, marginally increasing the income threshold for taxation to reflect inflationary pressures. While the relief may not be transformational, it offers breathing space to middle-income earners who have borne the brunt of indirect taxes and fuel hikes in recent years. Moreover, the budget refrains from imposing any new taxes on salaried income brackets, providing a measure of stability amidst broader tax reforms aimed at widening the net and reducing leakages in the informal sector. Muhammad Sheroz Khan Lodhi, Karachi Copyright Business Recorder, 2025
Business Recorder
3 days ago
- Business
- Business Recorder
Balancing the books and the battlefield: Pakistan's fiscal strategy for FY2025–26—I
On June 10, 2025, Finance Minister Muhammad Aurangzeb unveiled Pakistan's federal budget for FY 2025–26, presenting a masterful exercise in fiscal restraint. Total expenditures have been trimmed by 7 percent to Rs 17.57 trillion (USD 62 billion), while defence spending has been augmented by a 20 percent, rising to Rs 2.55 trillion (USD 9 billion). This recalibration reflects the heightened military posture following recent India–Pakistan tensions and is widely perceived as a well-deserved recognition of the Pakistan Army's recent victory in the conflict. Their strategic acumen and operational excellence not only safeguarded national sovereignty but also elevated Pakistan's regional stature. Despite the defence surge, the budget maintains a tight rein on the deficit — targeting around 3.9 percent of GDP, with a forecasted primary surplus of 2.4 percent. Growth is projected at 4.2 percent, a significant recovery from prior stagnation. Inflation is expected to settle between 7–7.5 percent, supported by targeted subsidy removals, fiscal tightening, and administrative price controls. To meet its revenue objectives, the government has committed to robust tax reforms. These include phasing out the non-filer category, digitizing the Federal Board of Revenue (FBR), and expanding the withholding tax regime. The goal is to enhance the tax-to-GDP ratio from its current 9.5 percent to a more sustainable 14 percent in the coming years. Muhammad Sheroz Khan Lodhi (Karachi) Copyright Business Recorder, 2025
