ISLAMABAD: Finance Minister Senator Muhammad Aurangzeb on Friday presented Pakistan’s Federal Budget 2026-27 in the National Assembly, proposing total expenditures of Rs18.77 trillion while announcing relief measures for salaried individuals, increases in government salaries and pensions, and significant allocations for defense and development spending.
While presenting the government’s third budget, the finance minister thanked coalition partners and termed it an honor to present the annual financial plan. He highlighted Pakistan’s recent economic achievements, including improvements in foreign exchange reserves, remittances, and economic growth.
Economy Reaches $452 Billion
Aurangzeb stated that Pakistan’s economy has expanded to $452 billion, marking a new milestone, while per capita income has increased from $1,751 to $1,901. He said large-scale manufacturing recorded a growth rate of 6.1 percent, while the services sector grew by 4.1 percent during the current fiscal year.
The finance minister also noted that foreign exchange reserves have increased from around $4 billion three years ago to over $17 billion, enough to cover three months of imports.
Remittances Expected to Cross $41 Billion
According to the minister, workers’ remittances reached $38 billion during the first 11 months of the current fiscal year and are expected to exceed $41 billion by year-end.
Defense Budget Set at Rs3 Trillion
The government has proposed Rs3 trillion for national defense, describing it as a top priority. An allocation of Rs1.071 trillion has been proposed for civil administration expenditures.
Government Employees to Receive 7% Raise
The finance minister announced a 7 percent increase in salaries for federal government employees and proposed a 7 percent increase in pensions for retired employees.
Additionally, the government has proposed raising the minimum monthly wage by 10 percent.
Tax Relief for Salaried Class
Aurangzeb announced tax relief for salaried individuals across four income slabs:
- Annual income of Rs2.2 million to Rs3.2 million: Tax rate proposed at 20%
- Annual income of Rs3.2 million to Rs4.1 million: Tax rate proposed at 25%
- Annual income of Rs4.1 million to Rs5.6 million: Tax rate proposed at 29%
- Annual income of Rs5.6 million to Rs7 million: Tax rate proposed at 32%
The government has also decided to abolish the 9 percent surcharge previously imposed on salaried taxpayers.
Super Tax Relief for Businesses
The finance minister proposed abolishing the super tax on six income slabs ranging from Rs150 million to Rs500 million. For companies earning above Rs500 million, the super tax rate has been proposed to be reduced from 10 percent to 8 percent.
However, the surcharge will remain applicable to banks, oil and gas exploration companies, and fertilizer manufacturers.
Development Spending and Social Welfare
The government has allocated Rs3.675 trillion for the national development program, including:
- Federal development program: Rs1 trillion
- Provincial development programs: Rs2.224 trillion
- State-owned enterprises’ investment: Rs451 billion
For infrastructure and transport projects, Rs365 billion has been earmarked under the federal development program.
The Benazir Income Support Programme (BISP) is proposed to receive Rs838 billion, representing a 17 percent increase compared to the previous year.
Allocations for AJK, Gilgit-Baltistan, and Merged Districts
The budget proposes:
- Rs146 billion for Azad Jammu and Kashmir
- Rs88 billion for Gilgit-Baltistan
- Rs95 billion for the merged districts of Khyber Pakhtunkhwa
Revenue and Expenditure Targets
According to the budget documents:
- Federal non-tax revenue target: Rs5.336 trillion
- Federal government’s net revenue: Rs11.751 trillion
- FBR tax collection target: Rs15.264 trillion
- Federal development budget: Rs1.05 trillion
The total federal expenditure is estimated at Rs18.771 trillion, including:
- Rs8.054 trillion for debt servicing
- Rs3 trillion for defense
- Rs1.169 trillion for pensions
- Rs1.091 trillion in subsidies
- Rs430 billion for emergency-related expenditures
- Rs1.071 trillion for civil government operations
Fiscal Deficit to Decline
Aurangzeb said Pakistan’s tax-to-GDP ratio has improved to 10.3 percent, while the fiscal deficit is expected to decline from 7.8 percent of GDP in June 2023 to 4 percent by the end of the current fiscal year, reflecting the government’s ongoing fiscal consolidation efforts.
