In a major development ahead of the new fiscal year, the federal government is preparing to unveil the Federal Budget 2025-26, setting the overall outlay at Rs17,500 billion (Rs17.5 trillion).
This marks a notable decrease of Rs1,300 billion compared to the current fiscal year, signaling a shift towards tighter financial discipline.
According to official sources, the Federal Board of Revenue (FBR) has been assigned a tax collection target of Rs14,100 billion for the upcoming fiscal year. Interestingly, this target is slightly below the earlier IMF-demanded figure of Rs14,300 billion, hinting at a carefully negotiated middle ground between economic growth and fiscal responsibility.
Austerity measures tighten grip
In line with IMF directives, the government plans to implement strict austerity measures. These include a ban on the purchase of new vehicles for all federal ministries and departments, as well as limitations on electricity and gas usage. Unnecessary supplementary grants will no longer be entertained, and emergency funds will only be released in case of natural disasters.
The government has also finalized allocations for major spending heads. Around Rs9,000 billion is expected to be spent on debt servicing alone. This includes Rs7,700 billion for domestic loans and interest payments, and another Rs1,300 billion for external debt servicing.
Development, subsidies, and welfare
Despite the tighter fiscal framework, development projects and social protection programs have not been left behind. Approximately Rs1,400 billion will be allocated for subsidies, while Rs1,620 billion will be issued as grants by the federal government. The Benazir Income Support Programme (BISP) is also set to receive a significant boost, with Rs700 billion earmarked for disbursements to vulnerable segments of society.
Moreover, the government expects to receive a Rs1,200 billion budget surplus from provincial administrations, easing pressure on federal finances.
Tax reforms in the pipeline
In a bid to enhance revenue, the government is also eyeing changes in the taxation structure. Sources suggest a hike in sales tax on small cars, increasing it from 12.5% to 18%. Similarly, taxes on dividends and profits from shares are also expected to go up, impacting investors and small vehicle owners alike.
With key estimates now in place, the federal budget draft is in its final stages. The emphasis on austerity measures in Pakistan, debt servicing, and smart taxation highlights a more calculated approach aimed at ensuring economic stability while fulfilling commitments to international lenders.
As the budget announcement draws near, all eyes remain on how the government balances growth aspirations with fiscal restraint in the Federal Budget 2025-26.
