Islamabad: Finance Minister Muhammad Aurnagzeb in his budget speech highlighted the current account surplus, remittances and the stability of the rupee while also mentioning the positive reports from international credit rating agencies Moody’s and Fitch that upgraded Pakistan’s rating.
Budget outlay
The federal budget for fiscal year 2026 has a total outlay — the sum of expenditures and net lending of funds — of Rs17.573 trillion, representing a 6.9 per cent decrease from the previous year’s budget.
The government has proposed Rs16,286bn for current expenditure in the FY26 budget, a 5.33pc decrease from the previous year.
Interest payments, or debt servicing, have contracted by pc to Rs8,207bn, yet still continuing to consume almost half of total budget outlay and becoming, like last few years, the government’s single largest expense.
Defense Budget
Defence expenditure constitutes Rs2,550bn, 20.2pc higher than last year’s budget, making up 1.97pc of GDP, an increase from last year’s 1.71pc.
Aurangzeb said that it was unavoidable to aim for a 14pc tax-to-GDP ratio and added that achieving the national targets was “impossible without the transformation of the Federal Board of Revenue (FBR).”
FBR target
The government has set an ambitious tax collection target for the FBR at Rs14,131 billion, an 8.95pc increase from last year’s goal.
Detailing that transformation, the minister listed B2B e-voicing, AI-based audit selection systems for sales and income tax, e-billing and faceless audits, and a new central control unit to centralise data collection, among other steps.
Expanding upon the results, he said 390,000 high-value non-filers of tax were identified through data integration, with Rs300m recovered. The minister further highlighted that there was a 100pc increase in the number of tax filers, taking the revenues to Rs105bn.
“For the first time, the IMF (International Monetary Fund) has acknowledged Rs389bn revenues through law enforcement,” he said.
Procure cheap energy
The finance czar said that there was a 31pc reduction in electricity prices, as well as 50pc reduction in prices for protected consumers.
Mentioning the privatisation of distribution companies, he said: “Professional boards have been cleared of political corruption.”
The minister went on to announce that the government had made plans to “procure cheap energy”. Noting the closure of costly power plants and reforms in the oil and gas sector, he said Turkish and other international companies were willing to invest in Pakistan.
Regarding the energy sector, the minister said that the government needed to ensure the provision of cheap energy.
He said that 47 schemes and Rs90.2bn were allocated to the energy sector, including Rs840m for the Tarbela 5th Extension, Rs10.9bn for the Dasu hydel project, Rs3.5bn for the 884MW Suki-Kinari Hydropower Project, and Rs35.7bn for the Momand hydel dam.
The allocations for other power projects included Rs4.4bn for the Allama Iqbal Industrial City grid station, Rs1.1bn for the Quaid-i-Azam Business Park, Rs1.6bn for the 100KVA and 200KVA transformers asset performance management system, Rs2.9bn for the Islamabad Electric Supply Company (IESCO) advanced metering infrastructure, Rs1.8bn for the Multan Electric Power Company (MEPCO) getting, Rs1.9bn for the Hyderabad getting, Rs2.4bn for the Peshawar getting, Rs67.2bn for the Water and Power Development Authority (Wapda) clean electricity scheme, Rs3bn for five energy schemes of Azad Jammu and Kashmir and Gilgit Baltistan, and 1.2bn for GB grids.
He also mentioned the Matiari-Moro-Rahim Yar Khan Transmission Line project to strengthen transmission.
Reko Diq A game changer
“Gold mines in Reko Diq are a key part of our future. The plan’s feasibility study was completed in January,” he noted.
“We expect $71bn in cash flows [as well as] $7bn in tax and $8bn in royalties,” he said, terming the project a “game changer”.
Regarding the fiscal deficit, the government aims for a lower target of 3.9pc of the GDP — or Rs5,037bn — from last fiscal year’s target of 5.9pc.
National Tariff Policy
Detailing the steps to be taken under the National Tariff Policy, Aurangzeb said additional customs duties will come to an end in four years, regulatory duties will end in five years, Customs Act’s Schedule 5 will also be eliminated in five years, and customs duty will be structured in slabs, with the maximum being 15pc.
“Tariff reforms will be applied step by step so that businesses can adjust and challenges are reduced. This will apply to all economic areas, including pharma, IT, telecom, textile and engineering.”
Quoting the World Bank, Aurangzeb informed the NA that these instruments would lower the tariffs, bringing them to the same level as Vietnam and Indonesia.
He then spoke about improving debt management and said: “Our economy has been stuck in debt for two decades, paying back loans. Our debt-to-GDP ratio was 74pc two years ago. But now, it is below 70pc. We will lower it further.
Initiation of Sukuk Bond
“We are diversifying debt products, the Sukuk bond has been started and launching products is being considered.”
Privitization
The minister stressed that reforms in loss-making state-owned enterprises were underway, along with steps being taken to reduce fiscal strain and invite investment.
“We will complete PIA (Pakistan International Airlines) and Roosevelt Hotel transactions this year,” he asserted.
On pension reforms, the minister highlighted that the increase in pensions had been “linked” to the Consumer Price Index (CPI).
Pakistan seeks 1.3 billion dollar fund for climate change
Pointing out that Pakistan was one of the most vulnerable countries to climate change, the minister underscored the need for foreign assistance in mitigation, noting the IMF’s $1.3bn climate fund.
Social Protection to continue
On social protection, the minister reaffirmed the government’s commitment to helping the underprivileged, stating that Benazir Income Support Programme helped over 11m children go to school.
He added that 1.5m pregnant mothers and children were given funds, while 250,000 were granted training on financial literacy.
Muhammad Aurangzeb said 1928 billion rupees are being allocated in the domain of grants, which is for Benazir Income Support Programme, Azad Jammu and Kashmir, Gilgit-Baltistan and newly merged districts of Khyber Pakhtunkhwa.
He said the government intends to enhance the coverage of BISP. To achieve this, Kafalat Programme will be extended to 10 million families.
Educational scholarship programme will be widened in order to benefit 12 million students. He said there is a proposal to earmark 716 billion rupees for BISP in the next financial year.
He said that there is a proposal t set aside 140 billion rupees for AJK, 80 billion rupees each for Gilgit-Baltistan and newly merged districts of Khyber Pakhtunkhwa and 18 billion rupees for Balochistan from current expenditures.
Govt employees salaries increased by 10 percent
The government has decided to take a number of steps to provide relief to the government employees and reduction in the taxes of the salaried class.
The government has proposed 10 percent increase in the salaries of government employees from Grade-1 to Grade-22.
Besides, seven percent increase has been proposed in the pension of the retired government employees.
The Special Conveyance Allowance of four thousand rupees monthly for special persons will be increased to six thousand rupees.
Tax Relief for salareid classs
Finance Minister said the Prime Minister has always been making efforts to minimize the tax burden on the salaried class.
He said the government has proposed number of changes in all tax slabs on the income of the salaried class.
He said ratio of tax from the employees getting six to twelve lac rupees salary has been reduced to 2.5 percent from the existing five percent.
Tax amount has been reduced to 6000 rupees from existing 30,000 rupees on the employees getting twelve lac rupees. Similarly, it has been proposed to reduce tax from 15 to 11 percent on the employees receiving salary up to twenty two lac rupees.
Moreover, it has been proposed to reduce ratio of tax from 25 percent to 23 percent from the employees getting salary from 22 lac to 32 lac rupees.
The government has also proposed to reduce one percent surcharge on the people getting more than ten million rupees salary to prevent brain drain of highly professional and skillful people abroad.
Raising IT exports to $25bn in the next five years proposed
Speaking about the digital sector, Aurangzeb noted that Pakistan’s cybersecurity ranking was rising. “There has been Rs3.1bn in IT exports in the year’s 10 months, which is 21.2pc more than the previous year,” he said.
The minister proposed raising IT exports to $25bn in the next five years.
Small and Medium Enterprise
Aurangzeb informed the parliament that the Small and Medium Enterprise Development Authority had launched a three-year plan for financing small and medium enterprises.
He said that under the SME risk coverage scheme, 95,000 SMEs had received Rs300bn in funding till May 2025.
The finance minister mentioned that the government’s planned scheme would allow the purchase of cheap houses.
Foreign Remittences Increased by 31 percent
On the topic of overseas Pakistanis, he noted $31.2bn were remitted to Pakistan, recording a 31pc increase of $10bn.
He affirmed that the government was taking steps for overseas Pakistanis, including an online system, civil procedure laws to prevent fraud, a quota in chartered medical schools, and civil awards for the top 15 senders.
Agricultural Sector
Speaking about the agricultural sector, which comprises 34pc of the economy, Aurangzeb said Rs2.64bn were earned in FY24-25, adding that the National Seed Policy 2025 and the National Agri Technology Policy 2025 had been “nearly approved”.
The finance minister once again shed light on the agricultural sector, saying that fields were being revived under the Green Pakistan Initiative.
“Genetic improvement and post-harvest processes will be focused on,” he said, adding that a total of 1,000 agriculture graduates had been sent to China on government-funded programmes. He also announced five new livestock schemes.
Budget Deficit
Announcing the government’s plan to create a “competitive economy”, Aurangzeb said that economic growth in the upcoming fiscal year was expected to remain 4.2pc.
The budget deficit is aimed at 3.9pc of the GDP, while the primary surplus would be 2.4pc of the GDP.
The government aims to collect Rs1.413tr in FBR revenues, which would be 18.5pc higher than the outgoing year.
Provinces’ share in the federal revenues
He further said the provinces’ share in the federal revenues would be Rs8.246tr.
The minister also praised the Strategic Investment and Facilitation Council (SIFC) for taking forward “strategic brownfield and greenfield projects”.
“Interprovincial and interfederal connection improved,” he added.
Irrigation and Water Storages measures
Referring again to the recent Pakistan-India conflict, Aurangzeb stressed the need for the country to increase its water reservoirs and ensure water security.
Under the 2018 National Water Policy, he mentioned the goals of 10m-acre increase in water storage, 35pc reduction in water waste and 30pc increase in water-use efficiency.
He detailed that Rs133bn would be allocated for projects, Rs34bn for investment and Rs2bn for 15 key schemes, detailing the breakdown for various dams.
Out of that amount Rs. 95,000 million has been allocated for 15 key initiatives. These included projects aimed at enhancing water resources, improving flood resistance, installing telemetry systems across the Indus Basin and safeguarding water supplies.
Specifically, Rs. 32,700 million has been allocated for the Diamer-Bhasha Dam, Rs. 35,700 million for the Mohmand Dam, and Rs. 3,200 million for the Karachi Bulk Water Supply (K-IV) project.
Additionally, Rs. 10,000 million has been allocated for the lining of the Kalri Baghar (KB) Feeder, and Rs. 4,400 million for the installation of telemetry systems at the Indus Basin.
Further allocations include Rs. 1,800 million for the Pat Feeder Canal, Rs. 690 million for flood damage repairs on the Kachhi Canal, and Rs. 5,000 million for the Awaran, Panjgur, Garuk, and Gashkore Dam projects.
Grants for HEC
Aurangzeb said the Higher Education Commission (HEC) would be receiving Rs39.5bn for 170 projects, of which Rs38.5bn would be set aside for the provinces.
He added that electric wheelchairs, laptops and other audiovisual aids would be distributed under the programme.
For the IT sector, he said the government had proposed Rs4.8bn for ongoing projects under the Uraan Pakistan plan. The schemes included TV modules, a Pakistan-Korea testing facility, and a printed circuit board facility.
To bridge the illiteracy gap, the minister said Rs9.8bn will be allocated for 11 new Danish schools — four in Balochistan, three in Azad Jammu and Kashmir, three in GB and one in Islamabad.
He said that other projects in the education sector include establishment of Early Childhood Education centers, computer labs and National Institute of Excellence.
He said these are aimed at ensuring access to education, reduce the dropout rate and improve the standard of education. For these efforts, 18.5 billion rupees have been set aside in the PSDP.
Public Sector Development Programmes (PSDP)
Speaking about the Public Sector Development Programmes (PSDP), the minister said a total of Rs18.5bn had been earmarked for those, of which Rs3bn were for the prime minister’s scheme to rebuild flood-damaged schools in Sindh.
“A total of Rs4.3bn [have been allocated] for the PM’s Youth Skill Dev programme, under which 165,100 young people receive skills training,” he added.
On the health side, Rs14.3bn had been allocated for 21 schemes under the PSDP.
“Jinnah Medical Complex and Research Centre will get Rs4bn for a flagship teaching and treatment facility in the capital […] Rs1bn will be given to eradicate hepatitis,” he highlighted.
The minister added that Rs800m of these would be allocated for controlling and preventing diabetes, while Rs900m would be earmarked for a stroke centre at Pims Hospital in Islamabad.
Aurangzeb also detailed planned budget shares for AJK, GB and the merged districts of Khyber Pakhtunkhwa. “Out of a total of Rs164bn allocated for development projects, Rs48bn each would be set aside for AJK and GB, while Rs68bn would be for KP’s merged districts,” he said.
Giving a break up of PSDP 2025-26, the Finance Minister said out of 1000 billion rupees, the biggest amount of 328 billion rupees has been earmarked for transport infrastructure projects.
He said special emphasis has also been laid on road infrastructure projects.
On the instructions of the Prime Minister, 100 billion rupees have been allocated for the dualization of 813 kilometer long Karachi-Chaman highway.
15 billion rupees have been earmarked for Sukkur-Hyderabad motorway and seven billion rupees for Thar Coal rail connectivity project.
Specifically, Rs. 32,700 million has been allocated for the Diamer-Bhasha Dam, Rs. 35,700 million for the Mohmand Dam, and Rs. 3,200 million for the Karachi Bulk Water Supply (K-IV) project.
Additionally, Rs. 10,000 million has been allocated for the lining of the Kalri Baghar (KB) Feeder, and Rs. 4,400 million for the installation of telemetry systems at the Indus Basin.
Further allocations include Rs. 1,800 million for the Pat Feeder Canal, Rs. 690 million for flood damage repairs on the Kachhi Canal, and Rs. 5,000 million for the Awaran, Panjgur, Garuk, and Gashkore Dam projects.
