Finance Minister Muhammad Aurangzeb addressed the nation’s concerns on Wednesday, offering clarity and context on the newly announced budget 2025-26, presented just a day earlier in the National Assembly.
Facing tough questions from the media, Aurangzeb laid out the numbers, explained the rationale behind new policies, and promised reforms aimed at long-term economic stability.
Tax relief or confusion?
One of the hot-button topics was the income tax rate for salaried individuals earning between Rs600,000 and Rs1.2 million annually. Aurangzeb stated the rate would be 2.5%, but eyebrows were raised when the Finance Bill showed a lower 1% tax for this income bracket. He called the situation “a work in progress,” admitting every financial decision had a trade-off: “Every number is locked, so we must raise funds from one area to offer relief in another.”
Despite the confusion, he emphasized the government’s intention to provide tax relief for salaried class, though limited by the country’s current fiscal capacity.
Budget 2025-26: Reforms in focus
With a total outlay of Rs17.573 trillion, the budget 2025-26 targets a GDP growth of 4.2%, up from 2.7% this year. Aurangzeb said this was the first step toward creating a more competitive economy. The government set the inflation target at 7.5% and aims to bring the fiscal deficit down to 3.9% of GDP. Meanwhile, the primary surplus is expected to hit 2.4%.
To boost exports, the government has eliminated additional customs duty on 4,000 out of 7,000 tariff lines. Aurangzeb called this tariff reform “very significant” for encouraging local production and improving export potential.
The minister also reaffirmed plans to issue Pakistan’s first Panda bond this calendar year, while Euro and US dollar bond markets will be approached in 2026 once the country achieves an improved credit rating.
Addressing public concerns
Aurangzeb acknowledged the limited fiscal space in Pakistan, stating, “We can only provide as much relief as the budget allows.” The government aims to increase the tax-to-GDP ratio from 10.3% to 10.9% in FY26 by plugging system loopholes through legislation—avoiding an additional Rs400–500 billion in taxes.
On electricity bills, FBR Chairman Rashid Mehmood Langrial clarified that no new surcharge has been imposed, countering widespread rumors of a 10% hike.
As for the controversial 18% tax on solar panels, Langrial explained it targets less assembled panels only. Fully assembled imported panels remain tax-free to support local industry and promote a level playing field.
The government also maintained the minimum wage at Rs37,000, considering its impact on industrial growth. Aurangzeb assured that soft-term loans will be provided to small farmers, and no new taxes have been imposed on the agriculture sector.
Govt salary hike & IMF deal
Finance Secretary Imdadullah Bosal revealed that the government salary increase, ranging from 6% to 10%, would cost the exchequer around Rs28–30 billion. Discussions are ongoing with the Defence Ministry to introduce a contributory pension scheme.
Bosal also confirmed that the budget 2025-26 figures are “locked with the IMF,” reinforcing the need for stability and transparency.
