In a highly anticipated session of the National Assembly, Finance Minister Muhammad Aurangzeb presented Pakistan’s federal budget 2025-26, unveiling a comprehensive financial plan worth Rs17,573 billion amid a challenging economic landscape.
The budget speech, delivered under the leadership of Speaker Ayaz Sadiq, opened with a tone of unity and resilience. The Finance Minister acknowledged the nation's collective resolve against external pressures, notably referencing national solidarity in the wake of Indian hostilities.
“We are now shifting focus towards economic stability and growth, with a commitment to inclusive progress,” Aurangzeb said. He emphasized the government’s dedication to long-term development and public welfare, noting that key economic reforms over the past 18 months have placed Pakistan on a more stable trajectory.
Key highlights: Salaries, tax relief, and investments
Among the most welcomed announcements was a 10% salary increase for government employees and a 7% pension raise. Employees in grades 1 to 16 are also set to receive a 30% disparity allowance. In a bold move to ease the burden on the salaried class, significant income tax relief was proposed, including:
Reduction of income tax from 5% to 1% for those earning between Rs600,000 to Rs1.2 million annually
Tax cut from Rs30,000 to Rs6,000 for those earning up to Rs1.2 million
Reduced tax rates for income brackets up to Rs3.2 million
The budget estimates a deficit of Rs6,501 billion—around 5% of GDP. Total revenue target is set at Rs19,298 billion, with FBR’s tax collection goal at Rs14,131 billion. The government aims to generate Rs87 billion through privatization of state-owned enterprises.
Power sector reforms and water security
One of the most critical areas of reform is the power sector. The government has completed privatization of distribution companies in Faisalabad, Gujranwala, and Islamabad. It has also restructured NTDC into three independent entities to enhance efficiency. These initiatives are expected to help reduce losses significantly.
Additionally, Rs133 billion has been allocated to the Ministry of Water Resources in response to India’s violations of the Indus Waters Treaty. Major allocations include:
Rs32.7 billion for Diamer-Bhasha Dam
Rs35.7 billion for Mohmand Dam
Rs5 billion for three dams in Balochistan
Rs3.2 billion for Karachi’s K-IV water supply project
Economic outlook: Growth and revenue targets
The government has set an ambitious GDP growth target of 4.2% for the upcoming fiscal year, with inflation projected at 7.5%. Exports are targeted at $35.3 billion, with imports capped at $65.2 billion. Remittances are expected to touch $39.4 billion by the end of the fiscal year.
Investments are also in focus:
Public investment is projected at 3.2% of GDP
Private investment aims for 9.8%
Overall investment target is 14.7%
Development spending includes Rs1,000 billion for the Public Sector Development Program (PSDP), supporting nationwide infrastructure and energy projects.
A push for economic stability and growth
As Pakistan navigates its economic recovery, the 2025-26 budget reflects a balanced approach—focusing on economic stability and growth, public relief, and structural reforms. From tax reductions to privatization efforts and energy sector overhauls, the government is betting on long-term sustainability rather than short-term fixes.
With the country’s eyes set on fiscal discipline and strategic development, the coming year will be a critical test of Pakistan’s resolve to deliver on its vision of inclusive economic prosperity.
