Budget 2025-26 Pakistan- Key Highlights

Pakistan’s Finance Minister Muhammad Aurangzeb announced Federal Budget 2025-26 on Tuesday, June 10, 2025. Here is a brief summary of all his major announcements.

Economic Performance & Reforms

GDP Growth: Expected at 4.2% for FY2025-26.
Inflation: Reduced to 4.7% (from 29.2% two years ago), targeted at 7.5% for FY2025-26.
Fiscal Discipline: Primary surplus at 2.4% of GDP, budget deficit at 3.9% of GDP.
Remittances: Increased by 31% ($31.2B in 10 months), expected to reach $38B by year-end.
Foreign Reserves: Projected to hit $14B by year-end.
Debt Management: Debt-to-GDP ratio reduced from 74% to 70%, with further cuts planned.

Tax & Revenue Reforms

FBR Digital Transformation: AI-based audits, e-invoicing, and faceless customs to curb evasion.
- Results: 47% revenue increase from sugar sector, Rs30 crore recovered from non-filers.
Tax Relief for Salaried Class:
- Reduced rates: 5% → 1% (income Rs600K–1.2M), 15% → 11% (up to Rs2.2M).
- Super tax cut: 0.5% reduction for firms earning Rs10M–500M.
New Measures:
- Carbon Levy: Rs2.5/liter on petrol/diesel (rising to Rs5/liter in FY2026-27).
- E-commerce Tax: 18% sales tax on digital goods/services.
- Pensioners Tax: 5% on annual pension income above Rs1 crore (for under-70s).

Energy Sector Reforms

Power Sector Savings: Rs3,000B saved via IPP renegotiations, 3,000MW furnace oil plants shut.
Privatization: DISCOs (Faisalabad, Gujranwala, Islamabad) halfway privatized.
Renewable Energy: Rs67.2B allocated for hydro projects (Dasu, Mohmand dams).

Infrastructure & Development

PSDP Allocation: Rs1,000B for federal projects, focusing on:
- Transport: Rs328B for roads (Karachi-Balochistan highway, Sukkur-Hyderabad motorway).
- Water Security: Rs133B for dams (Diamer-Bhasha, Mohmand) and irrigation.
Reko Diq Project: Expected to generate $75B over 37 years, create 41,500 jobs.

Social Protection & Welfare

BISP Expansion: Rs716B allocation (+21%), covering 1 crore families.
Education: Rs9.8B for “knowledge schools” in underserved areas.
Health: Rs14.3B for projects, including Jinnah Medical Complex (Islamabad).
Salary/Pension Increase:
- 10% hike for federal employees (Grade 1–22).
- 7% increase in pensions.

Sector-Specific Initiatives

Agriculture: Rs2,066B in loans (+16%), new interest-free loans for small farmers.
IT & Exports: ICT exports up 21.2% ($3.1B), target of $25B in 5 years.
Housing: Tax cuts on property (WHT reduced from 4% to 2.5%), incentives for low-cost housing.
Overseas Pakistanis: Special courts, quotas in universities, and civil awards for top remitters.

Climate & Sustainability

Green Financing: $40B expected from World Bank/IFC over 10 years.
Pakistan’s First Green Sukuk issued for climate projects.

Privatization & SOEs

PIA & Roosevelt Hotel: Privatization targeted for FY2025-26.
SOE Reforms: 45 entities to be privatized/closed, 40,000 vacant posts abolished.

Key Messages

Digitalization: FBR reforms aim to boost tax-to-GDP ratio to 14%.
Export Growth: Tariff reforms to align with Vietnam/Indonesia, reducing duties to 0–15%.
Anti-Evasion: Stricter enforcement on non-filers, e-commerce, and cash transactions.

The finance minister maintained that budget 2025-26 emphasizes economic stability, digital transformation, and social welfare, with a focus on reducing debt, expanding exports, and climate resilience.

Budget 2025-26 at a glance