ISLAMABAD: Pakistan’s Finance Minister Muhammad Aurangzeb on Tuesday unveiled the federal budget for the fiscal year 2025–26, with a total outlay of PKR 17.573 trillion, down 7% as compared to the PKR 18.9 trillion budgeted outlay of FY25.
Presenting the budget in the National Assembly, Aurangzeb said he was honoured to deliver the government’s second budget.
The Finance Minister said the IMF has shown trust in the reforms undertaken by the incumbent government and those claiming about the minibudget have turned silent now.
As for the energy reforms, the government reduced the electricity prices for the industrial sector by up to 31 percent. The electricity prices were also reduced for the deserving 10.8 million people.
Earlier, the federal cabinet on Tuesday approved the budgetary proposals for the fiscal year 2025-26.
Chaired by Prime Minister Shehbaz Sharif, the special cabinet committee deliberated on the budget proposals and accorded its approval to the Finance Bill.
Speaking on the National Assembly floor, the finance minister said the federal budget being presented at an “extremely important and historic moment,” while praising national unity during recent tensions with India.
“This budget comes at a pivotal time for our nation’s future,” he said, commending the country’s military and political leadership for their “successful handling of the recent war-like situation” with India.
“The entire nation demonstrated remarkable unity during the recent Pakistan-India conflict,” Aurangzeb said, extending congratulations to both military and civilian leadership for their “victorious response.”
He noted that Pakistan’s prestige has risen in the international community while emphasising the government’s renewed focus on economic development through national unity and determination.
The minister highlighted that economic stability has been achieved through structural reforms, noting, “several measures have been implemented to improve the economy.” He credited recent policy actions for bringing “economic stabilisation through reform measures”.
Referring to the recent economic situation, Aurangzeb noted that inflation has come down significantly, while remittances were $36 billion in 10 months.
Pakistan targets 4.2% growth
Finance Minister Aurangzeb announced that the budget targeted a modest 4.2 percent growth for the coming fiscal year, compared to 2.7 percent in the outgoing fiscal year 2025-26.
The CPI inflation rate is budgeted to be around 7.5 percent in FY26, whereas the budget deficit is expected to be around 3.9 percent of the GDP, while the primary surplus is budgeted at 2.4 percent of the GDP.
“We are focused on economic stability and prosperity. We want an economy which is equitable and sustainable,” said Aurangzeb in his address.
Talking about the outgoing fiscal, the finance minister said that the country achieved a surplus of around 2.4 percent of the GDP in FY25, whereas the CPI rate declined to 4.7 percent.
“We expect a current account surplus of around $1.5 billion this fiscal,” he said, adding that remittance inflows are expected to hit $37-38 billion in FY25.
On taxation measures, the finance minister said that from July onwards, the tax filing process will be simplified.
Finance Minister Aurangzeb, presents the federal budget for the second time as the coalition government seeks to revive the economy, meet the International Monetary Fund (IMF) benchmarks and provide some relief to the tax-weary masses.
Mark-up payments
Of the total expenditure, PKR8.2 trillion has been allocated for mark-up payments, accounting for 47 percent of the total government expenditure.
PSDP allocation
The federal government has allocated PKR1 trillion for the Public Sector Development Programme (PSDP).
FBR tax target
The Federal Board of Revenue (FBR) is assigned to collect PKR14.13 trillion in FY26, up 19percent as compared to PKR11.9 trillion revised estimates for FY25.
The tax collection for FY26 includes PKR6.9 trillion in direct taxes and PKR7.2 trillion in indirect taxes.
Defence budget
Pakistan has allocated PKR2.55 trillion for defence in the incoming fiscal year, higher than PKR2.1 trillion, i.e. an increase of over 21percent allocated in FY25.
Talking about debt management, the finance minister reiterated that the preparation for the issuance of the first Panda Bonds is completed to penetrate the Chinese capital market.
He added that the privatisation process of PIA and the Roosevelt Hotel will be completed in the incoming fiscal year.
Finance Minister Aurangzeb, who is delivering his second budget speech in the National Assembly, will also lay the Finance Bill 2024 in the Senate on the same day, as required under Article 73 of the Constitution.
Ahead of the budget address, the federal cabinet approved the budget proposals for the next fiscal year (2025-26).
Addressing the federal cabinet meeting, Prime Minister Shehbaz Sharif said Pakistan has now come into a take-off position as all economic indicators are satisfactory.
“After defeating India in a conventional war, now we have to surpass it in the economic field as well,” he added.
The budget comes a day after the government missed its GDP growth target of 3.6 percent in the outgoing fiscal year, posting a figure of 2.7 percent, as revealed in the Economic Survey 2024-25.
However, Aurangzeb, during his press briefing while unveiling the Pakistan Economic Survey 2023-24, highlighted a strong 4.8 percent rebound in industrial activity, pushing the economy’s size to $411 billion for the first time and raising per capita income to $1,824.
Salaried class gets tax relief
The federal government has announced significant tax relief for the country’s salaried class in the budget for fiscal year 2025–26.
Finance Minister Aurangzeb said the move is aimed at supporting middle and high-income earners who have long shouldered a disproportionate tax burden.
The most substantial relief is for those earning between Rs600,000 and Rs1.2 million annually.
Their tax rate has been reduced from 5% to just 1%, meaning an individual earning Rs1.2 million would now pay Rs6,000 in annual tax, compared to Rs30,000 previously.
Taxpayers earning up to Rs2.2 million a year will see their rate drop from 15% to 11%. For those earning between Rs2.2 million and Rs3.2 million, the rate has been cut from 25% to 23%.
Aurangzeb said the changes are designed not only to provide immediate financial relief but also to keep salaries aligned with inflation and simplify the tax structure.
To help retain skilled professionals, the budget also proposes a 1% reduction in surcharge on incomes above Rs1 million.
Pakistan allocates PKR 39,488 million for Higher Education
Pakistan’s has earmarked PKR 39,488 million under the Public Sector Development Programme (PSDP) for the Higher Education Commission (HEC) to fund 140 projects—including 128 ongoing and 12 new schemes—for the fiscal year 2025–26.
According to the budget documents released on Wednesday, PKR 38,488.216 million has been allocated for ongoing initiatives, while PKR 1,000 million is designated for new projects.
Among the ongoing schemes, key allocations include PKR 500 million for awarding 3,000 Allama Muhammad Iqbal Scholarships to Afghan students (under the Prime Minister’s directive), and PKR 200 million for constructing an academic block at Shaheed Zulfiqar Ali Bhutto Medical University (SZABMU), Islamabad.
Other significant allocations include PKR 250 million for the development of the main campus of Bacha Khan University, Charsadda, and PKR 500 million for upgrading the National University of Medical Sciences (NUMS), Rawalpindi.
The government has also set aside PKR 611 million for the establishment of Kamyab Jawan Sports Academies and Youth Olympics initiatives, and PKR 558 million for the University of Baltistan, Skardu.
Additionally, PKR 100 million is allocated to the Fulbright Scholarship Support Program (HEC-USAID Phase-III), PKR 2,300 million for the Overseas Scholarship Program for MS/MPhil leading to PhD (Phase III), and PKR 3,670 million for the PhD Scholarship Program under the Pak-US Knowledge Corridor (Phase I). PKR 800 million will go toward establishing the Pak-Korea Nutrition Centre (PKNC) to enhance child and community nutrition.
Among the new initiatives, PKR 50 million has been allocated for Allama Muhammad Iqbal Scholarships for students from Bangladesh, Uzbekistan, and other friendly countries.
The government will also spend PKR 100 million to establish a new campus of the Pakistan Institute of Fashion Design in Karachi. Furthermore, PKR 150 million each has been allocated for setting up a university campus in Muzaffargarh and for the UVAS Campus in Pattoki.
Meanwhile, the Federal Government allocated PKR 18,580 million under the Public Sector Development Programme (PSDP) for the fiscal year 2025-26 to support both ongoing and new projects under the Ministry of Federal Education and Professional Training (FEPT).
According to budget documents released on Tuesday, PKR 18,280 million has been designated for ongoing projects, while Rs 300 million is set aside for new initiatives.
Key allocations among ongoing projects include PKR 164 million for 1,600 scholarships for students from Indian Occupied Kashmir, as per the Prime Minister’s Directive (4th Revised).
Additionally, PKR 4,300 million has been earmarked for the Prime Minister’s Youth Skills Development Programme, and PKR 1,000 million for the Pakistan Education Endowment Fund.
The government has also allocated PKR 900 million to improve basic education infrastructure in Islamabad Capital Territory (ICT) schools under the Federal Directorate of Education.
A substantial PKR 1,800 million has been set aside for establishing Daanish Schools in ICT’s Kuri area, while PKR 8,000 million has been allocated for setting up Daanish Schools in Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and Balochistan.
For new projects, PKR 100 million has been allocated for the creation of three educational institutions: a Centre of Excellence for Children with Autism at H-11/4, Islamabad Model College for Girls (Prep-XII) in B-17, Multi Gardens, and Islamabad Model College for Girls (Prep-XII) in F-17/2, Multi Professional Cooperative Housing Society.
