Pakistan Federal Budget 2025-2026 announced with Rs 17.573 trillion for the fiscal year 2025-26
The Federal Government has presented a Rs 17.573 trillion budget for the fiscal year 2025-26, with total resources matching expenditures. Key revenue components include Rs 14.131 trillion from FBR taxes and Rs 5.147 trillion in non-tax revenues, while Rs 8.206 trillion will be transferred to provinces. Financing needs will be met through non-bank and bank borrowings, external receipts, and privatization proceeds. Major expenditure allocations include Rs 8.207 trillion for interest payments, Rs 2.550 trillion for defence, Rs 1.055 trillion for pensions, and Rs 1.186 trillion in subsidies. Development spending totals Rs 1.287 trillion, including Rs 1 trillion for the Federal PSDP.
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Federal Budget 2025 at a glance
| Category | Amount (Rs. Billion) |
|---|---|
| TOTAL RESOURCES (I to V) | 17,573 |
| – Tax Revenue (FBR – Fed. Consolidated Fund) | 14,131 |
| – Non-Tax Revenue | 5,147 |
| a) Gross Revenue Receipts | 19,278 |
| b) Less Provincial Share | 8,206 |
| I. Net Revenue Receipts (a – b) | 11,072 |
| II. Non-Bank Borrowing (NSSs & Others) | 2,874 |
| III. Net External Receipts | 106 |
| IV. Bank Borrowing (T-Bills, PIBs, Sukuk) | 3,435 |
| V. Privatization Proceeds | 87 |
| Total (II + III + IV + V) | 6,501 |
| TOTAL EXPENDITURE (A + B) | 17,573 |
| A. Current Expenditure | 16,286 |
| – Interest Payments | 8,207 |
| – Pension | 1,055 |
| – Defence Affairs & Services | 2,550 |
| – Grants & Transfers to Provinces & Others | 1,928 |
| – Subsidies | 1,186 |
| – Running of Civil Government | 971 |
| – Provision for Emergency and Others | 389 |
| B. Development & Net Lending | 1,287 |
| – Federal PSDP | 1,000 |
| – Net Lending | 287 |
Federal Budget 2025–26: Growth-Driven, Relief-Oriented Fiscal Plan
The Federal Government on Tuesday presented a Rs 17.573 trillion budget for the fiscal year 2025–26, focused on public welfare, macroeconomic stability, and enhancing Pakistan’s global competitiveness. Finance Minister Senator Muhammad Aurangzeb stated the budget was being tabled at a historic moment marked by national unity, targeting economic revival, export enhancement, and investment promotion.
Relief for Salaried Class and Pensioners
A 10% salary increase was announced for federal employees (Grades 1–22), along with a 7% pension hike for retired employees. Additionally, a 30% disparity reduction allowance will be given to eligible departments, with special relief allowances for armed forces officers, JCOs, and soldiers. The conveyance allowance for disabled employees has also been raised from Rs 4,000 to Rs 6,000.
Macroeconomic Targets
The government projected a GDP growth rate of 4.2%, inflation at 7.5%, and a fiscal deficit of 3.9% of GDP. The primary surplus is targeted at 2.4% of GDP for FY2025–26.
Revenue and Expenditure Breakdown
FBR’s revenue target has been set at Rs 14,131 billion (an 18.7% increase YoY), and non-tax revenues at Rs 5,147 billion. The federal government’s net income stands at Rs 11,072 billion, while total expenditure is Rs 17,573 billion. Major spending includes Rs 8,207 billion on interest payments and Rs 1,000 billion for the Public Sector Development Programme (PSDP).
Key Budget Allocations
- Defence: Rs 2,550 billion
- Civil Administration: Rs 971 billion
- Pensions: Rs 1,055 billion
- Subsidies: Rs 1,186 billion
- BISP and Transfers (AJK, GB, KP merged districts): Rs 1,928 billion
BISP’s allocation has increased by 21% to Rs 716 billion, aiming to expand coverage to 10 million families.
FY2024–25 Economic Performance
The outgoing fiscal year saw significant improvements: a 2.4% primary surplus, inflation down to 4.7%, and a $1.5 billion current account surplus. Remittances rose by 31% to $38 billion, and SBP reserves are expected to reach $14 billion.
Global Recognition
Pakistan’s economic reforms and stabilization strategy were acknowledged by international rating agencies, financial institutions, and global surveys.
FBR Transformation and Tax System Reforms
The government launched a digital overhaul of the FBR, introducing production tracking, e-invoicing, AI audit systems, POS integration, and faceless audits. Tax-to-GDP ratio rose from 8.8% to 10.3%, expected to hit 10.4% by June 2025.
Energy Sector Reforms
Key reforms include a 31% industrial and 50% consumer tariff cut, renegotiation of IPP contracts (saving Rs 3,000 billion), NTDC restructuring, and a new legal framework for a competitive power market. Oil and gas reforms aim to attract investment.
Public Debt and Privatization
Debt-to-GDP ratio fell from 74% to 70%. The government aims to privatize key SOEs, including PIA, Roosevelt Hotel, and select DISCOs and GENCOs. Rightsizing of ministries is also underway.
IT and SME Development
The government targets $25 billion in IT exports over five years. Investment and SME growth will be accelerated under the Special Investment Facilitation Council.
Agriculture Sector Initiatives
An agricultural credit target of Rs 2,066 billion has been set, along with projects for quality seed distribution and water reservoir development to boost food security.
Tax Relief and Adjustments
- Income tax reduced to 1% for those earning Rs 600,000–1.2 million annually
- Reduced tax for slabs up to Rs 3.2 million
- Super tax cut by 0.5% for Rs 200–500 million corporate earnings
- WHT reduced on property transactions
- FED on property transfers abolished
- Stamp duty in Islamabad cut to 1%
- New tax credit for low-cost housing loans
Other Taxation Changes
- 5% tax on pensions over Rs 10 million annually (for pensioners under 70)
- Advance tax on cash withdrawals (non-filers) raised to 1%
- 18% sales tax proposed on imported solar panels
- Gradual removal of tax exemption for merged areas of KP and Balochistan over five years
- Rs 2.5 per liter carbon levy on fossil fuels (to rise to Rs 5 in FY2026–27)
- Higher taxes on petrol/diesel cars
- Increased taxation on digital services and courier platforms
Federal Budget 2025–26 lays out a comprehensive economic strategy balancing fiscal consolidation with targeted relief. With reforms across taxation, energy, and development, the government aims to boost productivity, reduce inequalities, and promote sustainable growth.
