Planning Minister Ahsan Iqbal has confirmed an increase in Pakistan’s defence budget for the upcoming fiscal year. Speaking to a delegation of engineers, he assured the public that the government also aims to provide relief in the new budget.
Iqbal dismissed claims of pressure from the International Monetary Fund (IMF). He clarified the budget delay was due to Eid holidays and the prime minister’s foreign visit, not IMF demands.
Water Projects a Priority
Iqbal said water-related projects are being prioritised to counter India’s water aggression. The government will allocate dedicated funds to ensure long-term water security. He also promised early completion of key projects like the Diamer-Bhasha Dam.
Security and Defence
The minister said the worsening security situation demands an increased defence budget. Ahsan Iqbal announced a new paid internship programme for young engineers and assured their demands would be considered in the upcoming budget.
He stressed that national unity would not be compromised, especially after recent military success against India.
IMF and Budget Talks
Meanwhile, Pakistan and the IMF continued talks to finalise the upcoming federal budget. The Federal Board of Revenue (FBR) proposed reducing income tax rates for salaried individuals. The IMF questioned the Rs56 billion revenue gap this would cause.
While the IMF did not approve raising the taxable income ceiling, there is a proposal to reduce the first tax slab rate to 1% from 5%. The highest tax rate may drop from 35% to 32.5%. A 10% surcharge will apply to those earning Rs1 million per month, with gradual cuts to the Super Tax on high incomes.
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Defence Salaries and Tax Target
The government may raise military salaries due to inflation and security needs. Civilian pay and pensions will also rise, linked to the Consumer Price Index. The FBR’s tax target could increase from Rs14.05 trillion to Rs14.2 trillion, depending on budget needs.
IMF Mission Concludes Visit
The IMF mission, led by Nathan Porter, concluded its visit to Islamabad. Talks focused on fiscal planning for FY2026, tax reforms, and ensuring a 1.6% primary budget surplus.
The IMF praised progress but stressed the need for continued reforms, especially in the energy sector and taxation. They also urged a tight monetary policy to keep inflation in check.
World Bank Voices Support
World Bank Managing Director Anna Bjerde also visited Pakistan. She supported the country’s reform agenda and emphasised sustainable growth, private sector development, and support for women and youth.
Bjerde met top officials, including Prime Minister Shehbaz Sharif. She discussed coordinated efforts for economic recovery, health care, water access, and climate resilience.
She also visited flood-hit areas in Sindh and praised the World Bank-supported projects for health and housing reconstruction.
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