By Ashraf Wani
ISLAMABAD, Jun 10 (APP):Building on recent macroeconomic stabilization and a commitment to easing public hardship, the coalition federal government on Tuesday presented its second growth-driven and relief-oriented federal budget for the fiscal year 2025-26, with a total outlay of Rs. 17.573 trillion.
Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb presented the budget before national assembly.
The budget outlines a comprehensive fiscal plan for building competitive economy focusing to enhance exports, improve foreign exchange reserves, reduce fiscal imbalances and encourage economic productivity.
Minister Aurangzeb stated that the budget was being presented at a pivotal and historic moment, as the nation had exhibited unprecedented unity, courage, and resolve in the face of Indian aggression. “Leveraging this national resolve and unity, the government is now focusing on achieving economic stability, progress, and prosperity,” he remarked.
Relief For Salaried Class
Announcing relief measures, the minister announced a raise of 10 percent in salaries of employees from Grade 1-22 and an increase of 7 percent in the pension of retired employees. The minister also announced 30 percent disparity reduction allowances for eligible employees. He also proposed special relief allowances for military officers and soldiers/JCOs.
Growth Rate
The minister announced a projected economic growth rate of 4.2% for the fiscal year 2025–26. He stated that inflation is expected to remain at 7.5%, while the fiscal deficit has been estimated at 3.9% of GDP. Meanwhile, the primary surplus is projected to reach 2.4% of GDP.
Revenues and Expenditures
He said, the revenues collected target by Federal Board of Revenue (FBR) has been set at Rs.14,131 billion, showing an increase of 18.7 percent compared to fiscal year 2024-25. The federal excise duty is calculated at Rs.8,206 billion. The non –tax revenues are project at Rs.5,147 billion.
The minister said, the net income of federal government would be Rs11,072 billion whereas its expenditures have been estimated at Rs17,573 billion, out of which Rs8,207 billion would be spent on mark up payments.
He said, the current expenditures of federal government were Rs.16,286 billion whereas Rs1,000 billion have been earmarked for the Public Sector Development Programme.
Budget Allocations
He said, since defence of the country was top priority of the government and Rs2,550 billion would be provided for it whereas Rs.971 billion were kept for civil administration expenditures; Rs.1,055 billion for pension expenditures and Rs1,186 billion for subsidy on electricity and other sectors. Likewise, Rs.1,928 billion would be provided for BISP grants, and Azad Jammu and Kashmir, Gilgit-Baltistan and newly merged districts of Khyber Pakhtunkhwa.
The finance minister underscored that the government intended to increase the coverage the flagship initiatives of Benazir Income Support Programme under which the number of beneficiary families will be increased to 10 million. The government has increased the allocated amount for this by 21% to Rs 716 billion.
Economic performance in 2024-25
Outlining economic performance of fiscal year 2024-25, the minister said, the primary surplus was recorded at 2.4 percent of GDP whereas the inflation witnessed considerable reduction and was recorded at 4.7 percent. Likewise, the current account is expected to witness $1.5 billion surplus whereas as rupee has strengthen and remittances increased by 31 percent and are expected to reach $38 billion by the end of this fiscal year. He said, the reserves of State Bank of Pakistan also expected to reach $14 billion.
World Acknowledgements
He said, the macroeconomic stabilization programme of the country was acknowledged worldwide as was indicated by reports by various reputed financial institutions, rating agencies as well as national and international surveys.
FBR Reforms
Similarly, the FBR transformation plan was implemented to leverage people, process, and technology, while the government initiated digital transformation and integration to enhance the overall tax collection system. Key initiatives include digital production tracking, e-invoicing, AI-based audit selection, point-of-sale integration, faceless audits, and more. Additionally, the government is investing in human resource development to further strengthen the organization.
Energy Reforms
He said that significant reforms were introduced in the energy sector, including a 31% reduction in electricity tariffs for industry and 50% for 8 million protected consumers. Furthermore, agreements with Independent Power Producers (IPPs) were renegotiated, expected to save the national exchequer approximately Rs3,000 billion.
He further mentioned the reorganization of NTDC and noted that legislation and procedures had been finalized to promote a competitive and free market for the electricity sector. Additionally, he highlighted reforms in the oil and gas sector aimed at attracting investment to tap its vast potential.
He stated that the government is committed to creating a conducive environment to promote exports, encourage business, and attract investment, noting that the Ministry of Commerce has already taken several initiatives in this direction.
Debt Ratio
He stated that the debt-to-GDP ratio has been reduced from 74% to 70%. Additionally, reforms in State-Owned Enterprises are underway to plug leakages. The government expects to complete the transactions for Pakistan International Airlines (PIA) and the Roosevelt Hotel, and plans to further privatize key assets of DISCOs and GENCOs. Furthermore, rightsizing of various ministries is also in progress.
IT Development
The Minister highlighted IT’s importance for exports, aiming for $25 billion in IT exports within 5 years, while also prioritizing Small and Medium Enterprises development and promoting investment through the Special Investment Facilitation Council.
Agriculture Sector
Emphasizing agriculture as the backbone of the country’s economy, Aurangzeb stated that the government has allocated Rs2,066 billion for agricultural credit and launched several initiatives to provide high-quality seeds. He also underscored the importance of building water reservoirs on a war footing to address challenges and ensure food security.
Taxation Measures
Finance Minister also announced major tax relief for salaried individuals, reducing income tax rates across all brackets to ease inflation impact. The surcharge on high-income earners and super tax on mid-tier corporations has been reduced. Tax relief was also extended to the construction sector with lower withholding tax and stamp duties on property, and the elimination of federal excise duty on property transfers. A tax credit will support low-cost housing loans.
Interest income tax is increased from 15% to 20%, excluding national and small savings. New taxes are introduced on e-commerce and digital services. Pensioners over 70 earning above Rs. 10 million annually will be taxed at 5%. Advance tax on cash withdrawals by non-filers rises to 1%.
A 4% standard tax on commercial rental income is proposed. An 18% sales tax on imported solar panels aims to boost local manufacturing. Carbon levy on fuel is introduced, rising from Rs. 2.5 to Rs. 5 per liter by 2026–27. Tax exemptions in merged KP and Balochistan districts will be phased out. No new taxes on fertilizers or pesticides.
Federal employees get a 10% salary increase, a 7% pension rise for retirees, and enhanced allowances for disabled and armed forces personnel. The national tax-to-GDP ratio is projected to reach 12.3% by June 2025
