Pakistan is set to announce its federal budget for the fiscal year 2025-26 with an estimated outlay of Rs16.9 trillion, marking a 10.6% or Rs2 trillion reduction compared to the Rs18.9 trillion budgeted for FY2024-25, according to a report by Arif Habib Limited (AHL).
The reduction is largely due to a significant cut in debt markup payments, expected to fall from Rs9.8 trillion in FY25 to Rs8.5 trillion in FY26. This is attributed to the halving of the central bank’s benchmark interest rate to 11% from 22% the previous year, easing borrowing costs.
AHL’s report highlights that the lower expenditure will allow the government to focus on fiscal discipline and economic reforms while providing targeted relief. The overall fiscal deficit is projected at Rs6.2 trillion, with total revenue expected around Rs17.8 trillion.
The report also forecasts economic growth at 3.6% for FY26, with inflation rising to 6.29%. New tax measures, including GST on petroleum and income tax on retailers, are planned to broaden the tax base.
The government aims to balance stability and growth while aligning the budget with IMF guidelines, avoiding tax amnesties, and resolving issues like circular debt. The budget announcement is scheduled for June 10, 2025.
