Finance Minister Muhammad Aurangzeb presented the Federal Budget 2025-26 in the National Assembly, highlighting economic stability as the government’s top priority. He dismissed rumors of a mini-budget and confirmed that no new taxes have been introduced.
Key Economic Indicators
Aurangzeb reported that economic growth stands at 2.7%, while inflation has dropped to 4.7%. Remittances have reached $31.2 billion and are projected to hit $37-38 billion by year-end. The finance minister also noted improvements in Pakistan’s global credit ratings, with Fitch upgrading to B- and Moody’s signaling a positive outlook.
Tax Reforms and Digital Integration
Tax reforms aim to raise the tax-to-GDP ratio from its historically low 10%. The government has blocked Rs9 billion in fake refunds and used AI to detect Rs13 billion in fraudulent claims. New, simplified tax return forms for salaried individuals will launch on July 1. No new taxes were imposed, reaffirming the government’s intent to avoid financial shocks.
Read: Govt to Present Rs17.6tr Budget for FY26 in NA Today
Energy Sector Reforms
Electricity rates have been slashed by 38%, and inefficient power plants generating 3,000 MW have been shut down. Further reductions in tariffs are under review. Transmission losses have decreased by Rs140 billion. The government plans to privatize three distribution companies and is preparing legislation to establish a competitive electricity market.
Debt and Investment
The debt-to-GDP ratio has fallen below 70%. The government issued Sukuk bonds on the Pakistan Stock Exchange and plans to launch Panda bonds in China. However The Reko Diq mining project, expected to finish by January 2025, could generate $75 billion in revenue and 41,500 jobs over 37 years.
Sectoral Reforms and Future Plans
The budget includes reforms in pharmaceuticals, IT, and customs.
Salary Hikes and Consumer Taxes
The federal cabinet approved a 6% salary increase for government employees. Meanwhile, the government is considering excise duties on fast food, beverages, and snacks. An 18% sales tax on online shopping is also under review to broaden the tax base.
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