Kathmandu, June 12: Pakistan’s federal budget for FY2025–26, unveiled by Finance and Revenue Minister Senator Muhammad Aurangzeb, on June 11 marks a pivotal shift in the country’s economic trajectory. Emphasizing performance-driven governance, institutional reform, and financial discipline, the new budget outlines a cohesive framework aimed at sustained growth, macroeconomic stability, and inclusive development.

From Fragility to Stability

Pakistan has transitioned from economic uncertainty to a position of growing confidence. Aided by tough structural reforms and prudent fiscal policies, the country recorded a primary surplus of 2.4% of GDP, while inflation dropped to a two-year low of 4.7%. The current account is expected to close the year with a surplus of $1.5 billion, reversing a deficit of $1.7 billion last year—all achieved without any mini-budgets or additional taxes.

Key indicators highlight Pakistan’s economic rebound:

       •      Sovereign credit ratings upgraded by Fitch.

       •      International confidence from Moody’s, IFC, ADB, and the World Bank.

       •      Remittances up by 31%.

       •      Foreign reserves up by $2 billion.

       •      KSE-100 Index hitting record highs.

The government attributes these results to homegrown reform ownership and a disciplined, long-term strategy focused on resilience over reaction.

Tax Compliance and FBR Transformation

A cornerstone of the 2025–26 budget is the modernization of tax administration and expansion of the tax base. The Federal Board of Revenue (FBR) Transformation Plan—anchored on People, Process, and Technology—has rolled out AI audits, faceless customs, e-invoicing, and nationwide POS integration.

Key achievements include:

       •      390,000 high-value non-filers identified.

       •      Rs. 9.8 billion in fake refunds blocked.

       •      Rs. 3 billion recovered via data-driven enforcement.

       •      Filer base and registered tax-paying entities doubled.

Notably, for the first time, Rs. 389 billion in revenue collected through enforcement has been acknowledged by the IMF. Procedural fairness has been improved by simplifying income tax returns and establishing independent audit oversight committees.

Deep Structural Reforms

Pakistan’s reform journey continues with bold structural changes across key sectors:

Tariff Reforms:

       •      Reduction to four customs duty slabs: 0%, 5%, 10%, and 15%.

       •      Average tariff rates to fall below 10%.

       •      Phased elimination of Additional and Regulatory Duties.

Energy Sector:

       •      Industrial power tariffs reduced by 31%; household relief exceeding 50%.

       •      Rs. 3 trillion saved through renegotiation with IPPs.

       •      Over 3,000 MW of inefficient capacity decommissioned.

       •      Rs. 140 billion saved through improved governance at DISCOs.

Debt and SOE Reforms:

       •      Rs. 1 trillion domestic debt buyback; Rs. 850 billion in interest savings.

       •      Strategic classification of SOEs for privatization, PPP, or restructuring.

       •      Splitting NTDC into three companies for operational efficiency.

       •      Abolition of 40,000 vacant government posts and restructuring of 10 ministries.

Pension Reforms:

       •      Linkage of pensions to CPI.

       •      Elimination of multiple pensions and restrictions on family pension durations.

A Budget of Relief, Incentives, and Direction

Unlike past approaches focused on tax hikes, this budget delivers targeted relief and incentives:

Tax Relief:

       •      Significant cuts in income tax for salaried individuals earning up to Rs. 3.2 million.

       •      Super tax reduced by 0.5% for mid-sized corporates.

       •      Stamp duty in Islamabad reduced from 4% to 1%.

Sectorial Incentives:

       •      Agriculture: Rs. 100,000 collateral-free digital loans for 750,000 farmers.

       •      SMEs: Rs. 641 billion in financing; target Rs. 1.1 trillion by 2028.

       •      Construction: Tax credits for low-cost housing.

       •      IT: 21.2% growth in exports; $25 billion export target by FY2030.

Green Economy Initiatives:

       •      Introduction of a carbon levy.

       •      Rs. 30 billion in Green Sukuk issued.

       •      Electric vehicle incentives to reduce fossil fuel dependence.

Inclusive, Whole-of-Government Development Approach

Reflecting intergovernmental coordination, the budget allocates Rs. 4.2 trillion for development projects, including:

       •      Rs. 1 trillion for the Federal PSDP.

       •      Rs. 2.87 trillion across Provincial ADPs.

       •      60% of provincial budgets allocated to health, education, water, and social protection.

Key welfare and public sector highlights:

       •      BISP allocation increased to Rs. 716 billion, covering 10 million families.

       •      10% pay increase for civil servants (grades 1–22).

       •      7% pension hike and disparity allowance raised to 30%.

       •      Rs. 201 billion and Rs. 144 billion allocated for health and education, respectively.

Strategic Investment in Key Sectors

Agriculture:

       •      Rs. 2.07 trillion in credit extended, marking 16% annual growth.

       •      National Seed Authority and digital seed certification launched.

IT and Startups:

       •      $3.1 billion in exports over 10 months.

       •      185,000 new jobs generated in the startup ecosystem.

       •      Global accolades in e-governance and cybersecurity.

Green Finance and Climate Resilience:

       •      $40 billion Country Partnership with WB/IFC, one-third climate-focused.

       •      $77 million for the “Recharge Pakistan” flood resilience program.

Mining and Minerals:

       •      Reko Diq project projected to yield $75 billion and 41,500 jobs.

       •      $7.8 billion in royalties and $7 billion in taxes expected.

Conclusion: Confidence, Commitment, and Continuity

The 2025–26 budget is a clear declaration of Pakistan’s commitment to sovereign reform, economic discipline, and inclusive growth. Moving beyond stopgap measures, it offers a long-term blueprint for sustainable development, job creation, and financial independence.

“This budget is not just an accounting exercise—it is a vision statement for Pakistan’s future,” said Senator Aurangzeb. “We are replacing reaction with strategy, stagnation with reform, and imposition with empowerment.”

People’s News Monitoring Service.