Budget 2025-26: Govt aims for 4.2pc growth while trimming expenditure
Business
Finance Minister Aurangzeb unveils Rs17,573bn budget for FY2025-26
Rs2,550 bn allocated for defence, Rs8,207 bn for interests payment
GDP growth estimated at 4.2pc, budget deficit at 3.9pc, to remain at Rs6,501 bn
FBR's revenue collection target set at Rs14,131 bn
ISLAMABAD (Dunya News) – Federal Finance Minister Muhammad Aurangzeb on Tuesday presented the Rs17,573 billion budget for the fiscal year 2025-26.
Starting his speech, the finance minister said he was honoured to present second budget for the incumbent government. He thanked Prime Minister Shehbaz Sharif, Bilawal Bhutto Zardari, Khalid Maqbool Siddiqui and others for their support in the budget.
He said the timing of the budget was historic as the whole nation was united against India during the recent tensions.
Glimpses from today's Session of the National Assembly.#BudgetSession #Budget2025_26 pic.twitter.com/wnTrgR3XFN
— National Assembly (@NAofPakistan) June 10, 2025
"This budget comes at a pivotal time for our nation's future," he mentioned, praising the nation's military and political leaders for their "successful handling of war-like situation" with India.
Scenes of pandemonium were observed as soon as the budget session commenced as the opposition members started disrupting the speech of the finance minister.
He said the IMF has shown trust in the reforms undertaken by the incumbent government and those claiming about the minibudget have turned silent now.
Senator Muhammad Aurangzeb, Minister for Finance and Revenue, presenting the Federal Budget for the year 2025-26.#BudgetSession #Budget2025_26 pic.twitter.com/9wkR4YLl1E
— National Assembly (@NAofPakistan) June 10, 2025
Defence Allocation
A total of Rs2,550 billion have been allocated for the defence sector. Last year Rs2,122 billion were reserved for defence.
The federal government had allocated Rs920 billion in the federal budget for 2017-18, Rs1,100 billion in 2018-19, Rs1,153 billion in 2019-20, Rs1,289 billion in 2020-21, Rs1,370 in 2021-22 and Rs1,563 billion in the budget for 2022-23.
Development projects
The government has allocated Rs1,000 billion for the Public Sector Development Programme (PSDP) for the next fiscal year, prioritizing infrastructure, energy, water, and regional development initiatives.
As per documents, Rs662 billion is allocated to 31 federal ministries and divisions, while Rs332 billion is reserved for state-owned entities, including the National Highway Authority.
Budget Deficit, Inflation
The budget deficit is Rs6,501 billion. It showed a slight decrease from the last year when the deficit was Rs7,283 billion.
The federal government has set an inflation target of 7.5% for FY2025-26 in an effort to stabilise prices and curb inflationary pressures.
The economic growth for the fiscal year 2025-26 is estimated at 4.2percent. Last year, the growth was projected at 3.6pc
Interest Payment on loans
An amount of Rs8,207 billion has been earmarked for interest payments on loans.
Agricultural, Industrial and Services sectors
The government also proposed a 4.5pc growth target for the agriculture sector. Meanwhile, a national committee would be established by the Prime Minister to coordinate on this subject between the centre and provinces. Moreover, small farmers would be given loans aimed at uplifting them. The growth is set at 4.3pc for industrial development, and 4pc for the services sector.
Revenue Targets
The government has set the FBR’s revenue collection target at Rs14,131 billion for FY2025-26.
Federal Non-Tax Revenue
The target for federal non-tax revenue has been set at Rs5,187 billion. Last year, the non-tax revenue was set at Rs3,587 billion.
NFC Award
After providing almost 60% share to the provinces under the federal divisible pool (FDP) under the NFC Award, the provinces might secure Rs8,000 billion in the coming budget.
So the Centre will be left with the revenues of Rs6 trillion and non-tax revenues of Rs4 or Rs4,500 billion.
Tax ratio on cash withdrawal increased for non-filers
The government has increased tax ratio on cash withdrawals by the non-filers in the budget for FY2025-26.
The tax ratio on cash withdrawals by non-filers has been increased from 0.6pc to 1pc.
Non-filers will also no longer be allowed to open bank accounts.
Energy Reforms
As for the energy sector, the government reduced the electricity prices for the industrial sector upto 31pc. The electricity prices were also reduced for the deserving 10.8 million people. Also, the government renewed agreements with indepedent power producers (IPPs) and closed down power plants running on furnace fuel.
Salaries and Pensions
The federal government has increased salaries of the government employees by 10 percent. Moreover, pensions have been increased by 7 percent. Rs1,055 billion have been reserved for pensions.
Reduced taxes on the salaried class
A significant tax relief for the salaried class in the new budget has been announced which has reduced tax slabs across all income levels.
Individuals earning between Rs600,000 and Rs1,200,000 annually will now be taxed at a rate of just 1pc.
Moreover, for those earning Rs1.2 million per year, the proposed tax has been slashed from Rs30,000 to Rs6,000—offering substantial relief to middle-income earners.
Further revisions include a reduction in the tax rate for salaries up to Rs2.2 million, from 15 per cent to 11 per cent, while individuals earning between Rs2.2 million and Rs3.2 million will now pay tax at 23 per cent, down from the previous rate.
IT exports
IT exports have increased by 21.2 percent. In ten months, the IT exports have jumped to 3.1 billion dollars. The government has planned to increase the IT exports to 25 billion dollars.
Tax on solar panels hiked to 18%
The federal government has decided to impose an 18% sales tax on the imported solar panels during the fiscal year 2025-26.
It was said this step was taken to encourage the domestically produced solar panels.
Education sector
For higher education, the Higher Education Commission (HEC) has been allocated Rs39.5 billion for 170 projects. Rs18.5 billion set aside for other education projects.
Meanwhile, Rs9.8 billion allocated for the establishment of 11 new Daanish Schools. In the fiscal year 2025-26, Rs4.8 billion has been reserved for 31 science and technology projects.
Health sector
The government has allocated Rs14.3 billion for completion of health sector projects for fiscal year 2025–26.
The allocation was made with a strategic focus on improving healthcare infrastructure, disease surveillance, preventive medicine, maternal care, and emergency preparedness across the country.
An amount of Rs4 billion has been allocated for Jinnah Medical Complex and Research Centre, Islamabad, while Rs1 billion was allocated for the Prime Minister's Hepatitis C Eradication programme.
The government has also allocated an amount of Rs2 billion for the development of the Integrated Disease Surveillance and Response System (IDSRS).
Furthermore, Rs1.7 billion was allocated for the establishment of a cancer hospital in Islamabad.
An amount of Rs900 million has been allocated for the procurement of equipment for the federal capital's cancer hospital in federal capital.
Climate change
The government has focused a lot on climate finance strategy. Pakistan would get 40 billion dollars in the next 10 years under the World Bank and IFCC country partnership framework.
BISP
The total amount of Benazir Income Support Program has been raised by 20pc to Rs716bn.
In the previous fiscal year (FY2024-25), 10 million children were supported under this program. 9.9 million families were supported financially.
