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Rs 20.00 | Vol XV No 333 I 8 Pages I Islamabad Edition
Wednesday, 11 June, 2025 I 14 Zilhaj, 1446
FINANCE MINISTER MUHAMMAD AURANGZEB’S BUDGET AIMS FOR 4.2% GDP GROWTH WITH TAX REFORMS, BUT DOES IT ANSWER THE CHALLENGES IN MANUFACTURING, TAXATION, AND BROADER ECONOMIC RECOVERY?
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PROFIT
SHAHNAWAZ ALI
AKISTAN’s federal budget for fiscal year 2025-26, presented by Finance Minister Muhammad Aurangzeb on Tuesday, outlines an optimistic vision for economic recovery. Despite Pakistan’s ongoing economic challenges, the budget targets a 4.2% GDP growth, a modest improvement compared to the previous year’s 2.7%. The budget’s ambitious projections need to be contextualized within the performance of the previous year, which paints a more cautious picture of the country’s economic resilience and sustainability. The budget, totaling Rs17.6 trillion, reflects a 7% reduction from last year’s Rs18.9 trillion outlay, with significant changes in taxation and fiscal policies aimed at supporting economic stability. The budget targets a Consumer Price Index (CPI) inflation rate of 7.5% for FY26, alongside a fiscal deficit of 3.9% of GDP. The primary surplus is expected to be 2.4% of GDP. “We are focused on economic stability and prosperity. We want an economy that is equitable and sustainable,” said Aurangzeb during his speech. A key highlight of the budget is the reduction in income tax rates for the salaried class, aimed at stimulating consumer spending and easing the financial burden on middle-income earners. For instance, the tax rate for those earning between Rs600,000 and Rs1.2 million has been halved from 5% to 2.5%. Furthermore, tax rates for higher income groups have also been slightly adjusted, and the surcharge on income ex-
Govt presents ‘best budget’ despite limited resources: PM ISLAMABAD
STAFF REPORT
The federal cabinet, in its special meeting chaired by Prime Minister Shehbaz Sharif on Tuesday, approved the budgetary proposals for the next fiscal year, 2025-26. Prime Minister Shehbaz Sharif chaired a cabinet meeting, discussed the budget proposals, and approved the Finance Bill 2025 for presentation to the National Assembly for its onward consideration, according to Radio Pakistan. Speaking at the Cabinet meeting, PM Shehbaz Sharif said that the country’s economy was improving with each passing day as all economic indicators were showing upward trends. The meeting deliber-
ceeding Rs10 million has been reduced by 1%. Aurangzeb also emphasised simplified tax filing processes starting in July 2025. To emphasise this the government has decided to be tougher on the non-filers this time around. It has proposed to add 114C section in the finance bill which will impose restriction on economic transactions for non tax filers i.e. purchase of securities above a threshold, purchase of autos above 850cc, opening of bank account of IPS account except for Asan account.
Pti rejects budget 2025–26 as ‘pro-elite, anti-people’ ISLAMABAD
STAFF REPORT
Pakistan Tehreek-e-Insaf (PTI) on Tuesday categorically rejected the federal budget for the fiscal year 2025–26 and described it as “pro-elite” and “anti-people,” asserting the budget will only “worsen economic hardships of the ordinary citizens.” Addressing a presser after the budget, Leader of the Opposition in the National Assembly Omar Ayub said that his party and its allies “categorically reject” the budget, describing it as unrealistic and disconnected from ground realities. Senator Shibli Faraz, PTI’s Secretary General Salman Akram Raja, and Central Information Secretary Sheikh Waqas Akram were also present on the occasion. “The claim of 2.7% GDP growth is simply not possible,” he said, questioning the credibility of official statistics. “Who exactly went out and counted the increase in donkeys?” he remarked sarcastically, adding, “Tell us how many four-legged and how many twolegged donkeys have increased.” Criticizing the government’s economic narrative, he noted that while services like IT were being cited as growth areas, major industries and the food sector were registering negative trends. “Purchasing power has declined drastically,” he said, citing the price hike in essential commodities. “Wheat was Rs58 per kg during our time; it’s now Rs75. Eggs were Rs135 a dozen; now they’re Rs288.” PTI’s Secretary Information Sheikh Waqas Akram also lambasted the budget, referencing the finance minister’s earlier remarks. “He himself admitted that $10 billion in losses were incurred due to anti-farmer policies,” said Akram. “You didn’t have $2 billion, yet you inflicted $10 billion in losses.” Calling the budget a “sham document,” Akram added, “This is the budget the government couldn’t even name. We’ve given it a name: Leila Budget (referring to a sacrificial goat).” He said the budget provided no real relief to the public. “The salary increase for government employees translates to just Rs20,000–25,000 a year. It would have been better to apologise rather than announce such an insignificant raise,” he said. “A 7.6% increase in pensions—how, exactly? Even government servants are now being treated the way we are.”
PROFIT
THE EDITORIAL BOARD
The tradition of the annual budget speech is rapidly becoming meaningless. Every year, the finance minister delivers a barely audible speech while the opposition raises a ruckus, tearing up copies of the budget book and complaining about everything and nothing at once. Of course, the noise would be a shame if the finance minister were actually saying something new. This is not to suggest that there isn’t any new information in the federal budget. For 2025-26, the total outlay stands at Rs 17.53 trillion, a nearly 7% decline from last year. This contraction is accompanied by efforts to control spending, with a reduction of 5.33%, bringing expenditures to Rs 16.28 trillion. For the first time in years, debt servicing as a percentage of
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NA’s budget session to continue till June 27 for debate, approval
ated upon the key budget proposals and layout and accorded its approval accordingly. At the end of the Cabinet meeting, PM Shehbaz Sharif signed the document of the Federal Budget 2025-2026, according to state broadcaster PTV News. He said that despite limited resources, the government was presenting “the best budget,” according to a statement issued from the Prime Minister’s Office (PMO). During the meeting, the prime minister rejected the Finance Ministry’s proposal of 6 percent hike in salaries of the government employees, stressing that at least 10 percent pay raise should be given in the budget. The Cabinet also approved a 7 percent hike in the pensions of the government employees.
ISLAMABAD
STAFF REPORT
The House Business Advisory Committee (HBAC), chaired by Speaker Sardar Ayaz Sadiq has decided to extend the National Assembly’s budget session till June 27. The committee, comprising members from both the treasury and opposition, discussed the agenda and timeline for the 17th National Assembly session, with a focus on the Federal Budget 2025-26. During the meeting, the NA speaker announced that the National Assembly session will not be held on June 11 and 12, with debate on the Federal Budget beginning June 13 and running through June 21. “The Federal Budget 2025-26 discus-
Federal Budget 2025-26 at a glance ISLAMABAD
STAFF REPORT
The federal government on Tuesday presented a budget having a huge outlay of Rs17.573 trillion for the fiscal year 2025-26. Following is the breakup of resources and expenditures: TOTAL RESOURCES (I to V): 17,573
Tax Revenue (FBR) – Federal 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 Non-Bank Borrowing (NSSs & Others) – Public Account: 2,874 III. Net External Receipts – Fed. Con-
Decoding the Rs17.57 trillion federal budget PROFIT REPORT
The federal budget is a bunch of numbers that may or may not mean much to the people looking at it. However, these numbers have a huge impact on the lives of not only the taxpayers but every citizen of the country. Profit explains how a common man can make sense of the Rs 17.573 trillion budget announced today in the parliament house. Central to a country’s economic policy is the annual budget. It is in this document that a government decides whether it will increase or decrease its expenditure in a particular sector. The government also projects the revenues that it will collect through taxes and other sources in the budget and it is based on those estimates that the government allocates budgets to different sectors, ministries and provinces. Making a budget is hence an accounting exercise, with underlying policy objectives. The accounting exercise is divided into 6 essential steps namely, Preparation, Authorisation, Execution, Reporting and Monitoring, Review and Policy setting. This sounds a well-rounded approach to tackle the exercise however oftentimes, the miscalculation in the first two steps, renders the last 3 utterly moot. A good example of that would be the federal budget of FY23 which was changed majorly within days after being presented in the parliament. The annual budget statement (ABS) is the main document for the federal budget. After the prepa-
ration and authorisation, the ABS makes its way to the senate and eventually to the public. In terms of expenditures, the ABS categorically differentiates between “Receipts” and “Expenditures”. Revenues/Receipts Receipts or revenue consists of balances of all budgetary receipts, e.g. Revenue Receipts, External Receipts, Public Account Receipts. Revenue receipts contain all the tax and non-tax revenue to be collected by the FBR and the government during that year. Combined, these resources constitute federal gross revenue receipts. For the year 2025-26, the federal government has estimated this figure to be at Rs 19.28 trillion. At this step the provincial share is deducted to arrive at net federal receipts available to finance the federation’s expenditures which is going to be Rs 11.02 trillion. It’s important to note that the distribution of revenue between the federal government and the provinces is guided by the principles laid out in the NFC Award. The award determines the share of each province in the federal revenue pool based on factors such as population, backwardness, revenue generation capacity, and other socio-economic indicators. While this award has been highly criticised by economic experts at various levels, the provincial share in this year’s budget turned out to be Rs 8.2 trillion, of which Punjab is expected to take the most at 51.74%. It is important to note that the total amount of the NFC award is not only
Painfully Deja Vu
expenditures has decreased by 16%, amounting to Rs 8.027 trillion, though it remains the government’s largest liability. Defence expenditure has seen a hefty 20.2% increase, with Rs 2.55 trillion allocated to defence. Despite the reduction in overall expenditure, the government continues its focus on increasing taxation by 9%, bringing it to Rs 14.131 trillion. It is the same old story. The government remains stuck in its annual cycle of trying to increase revenue and decrease spending, without ever adopting the basic provisions required to achieve these goals. Constitutional restrictions prevent the government from taxing agricultural income. Additionally, there is a reluctance to tax underrepre-
more than the total income tax estimated to be collected by all filers (Rs 6.8 trillion but also less than the total indirect taxes Pakistan is estimated to collect during this year i.e. Rs 7.2 trillion. Additional resources in receipts may include privatisation proceeds plus credit from the banking sector to finance government expenditures. The government has estimated Rs.87 billion, almost at the minimum price it set for the sale of just the flag carrier PIA which was Rs 85 billion. This showcases the amount of hope the government has for the privatisation of all loss making State Owned Enterprises (SOE’s) including PIA during the next year. Pakistan’s tax revenue (a large part of the gross federal revenue) for the fiscal year 2025-26 is projected at approximately Rs. 14,131 billion, marking a significant increase from the revised estimates of Rs. 11,900 billion in FY 2024-25. This represents a growth of around 18.5%, with the expectation that the Federal Board of Revenue (FBR) will be instrumental in meeting the targets. In the last year, FBR’s collection has fallen short of the target, which was set at Rs. 12,970 billion, by nearly Rs. 1 trillion, with one month yet to go, a gap primarily attributed to structural inefficiencies and an expanding informal economy. In FY 2025-26, a more aggressive push is expected to bring in Rs. 12,970 billion from federal taxes alone, with a notable emphasis on improving tax compliance and modernising collection mechanisms.
sented groups in the tax net, such as retailers. Instead, the focus continues to be on widening the tax net, rather than deepening it. Then, there is the issue of the NFC award, which forces the government to share nearly 60% of its revenue with the provinces. For instance, in 2024-25, the total taxes collected by the FBR amounted to about Rs 12 trillion, yet the budget deficit stood at Rs 8.5 trillion. To balance the budget, the FBR wouldn’t just have to raise an additional Rs 8,500 billion; it would actually need to raise Rs 14,500 billion, as 60% of the FBR revenue goes to the provinces. This means taxes totaling Rs 26,500 billion or 22.5% of GDP, which is significantly higher than the US federal
sions will conclude on June 21, and there will be no session of the National Assembly on June 22,” the HBAC meeting decided. The Speaker said that parliamentary parties present in the National Assembly will be allotted time for debate in accordance with the rules and regulations. He said the National Assembly will hold a discussion on the allocated essential expenditures for 2025-26 on June 23. Mr Sadiq said that on June 24 and 25, discussions and voting on demands, grants, and cut motions will take place. He said the Finance Bill will be approved by the National Assembly on June 26, while the discussions and voting on supplementary grants and other matters will take place on June 27.
solidated Fund: 106 Bank Borrowing (T-Bills, PIBs, Sukuk) – Fed. Consolidated Fund: 3,435 Privatization Proceeds – Fed. Consolidated Fund: 87 Total (II+III+IV+V): 6,501 TOTAL EXPENDITURE (A+B) Rs17,573 billion Current: 16,286 Interest Payments: 8,207 Pension: 1,055 Defence Affairs & Services: 2,550
PSDP allocation slashed again in Rs4.224tr national development outlay PROFIT
GHULAM ABBAS
The federal government has unveiled a national development plan worth Rs 4.224 trillion for the fiscal year 2025–26, as approved earlier by the National Economic Council (NEC). According to the budget documents, this is the highest-ever government investment in the development sector. The total outlay includes Rs 1.00 trillion allocated for the federal Public Sector Development Programme (PSDP) and Rs 2.869 trillion earmarked for the provincial Annual Development Programs (ADPs). What stands out most prominently in the documents for the development budget is the reduction in the allocation for the PSDP. Last year, the government had set an ambitious allocation of Rs 1.4 trillion for PSDP projects. The first reality check regarding this figure came soon after the budget, when the International Monetary Fund (IMF) demanded that it be cut down. The allocation was revised to Rs 1.1 trillion soon after. By May this year, it became clear that the government had been more than just ambitious in its assessment. In the 10 months since the budget was passed, PSDP spending stood at a pathetic 41%. The development spending stood at Rs448.6bn in the first 10 months (July-April) of fiscal year 2025, accounting for less than 41pc of Rs1.1 trillion revised budget allocation for the whole year. The lack of spending suggests a large part of the Public Sector Development Programme (PSDP) — revised down from Rs1.4tr to Rs1.1tr — would remain unspent at the end of the fiscal year in June. The only exception that accounted for most of the paltry spending? Funds given to parliamentarians. The utilisation of funds at Rs 35 billion was even higher than the first revised allocation of Rs 25 billion for the current year. This year, the total PSDP budget is Rs 1 trillion. This is down by Rs 100 billion which indicates a close to 10% decrease. This was not expected considering the planning commission had announced they would be cutting it by 16% with a PSDP allocation of Rs 921 billion earlier this month. While the government has topped off the PSDP budget by a little more, it is still a significant change from last year’s initial goals of Rs 1.4 trillion.
government’s tax-to-GDP ratio of 16%, and more than our current tax collection. On the expenditure side, the government continues to bury its head in the sand. Pensions, for instance, continue to grow unchecked. The government has long been aware that radical reform is needed in the pension scheme, but no concrete steps have been taken. Without such reforms, our pension bill will eventually surpass even defence spending. Has there been any plan to move pensioners onto an investment-based scheme? No. The only province to take action in this regard has been Khyber Pakhtunkhwa, but even they have been slow and inefficient in implementing the scheme. Similarly, when it comes to debt repayment, the federal budget is dominated by interest payments, which now exceed defence expenditure by more than four times. This
CONTINUED ON PAGE 03 is the result of massive accumulated deficits and a reduction in low-cost external financing. Ten years ago, the deficit was financed through 40% external finance, 40% domestic banks, and 20% domestic non-banks. Last year, however, almost the entire deficit was financed by domestic banks, with external financing dropping to just 3%. The solutions to these problems are straightforward. There needs to be accountability, transparency regarding asset ownership, and a crackdown on the real estate loophole, where wealth is hidden through under-recorded transaction prices. On the expenditure side, a focused effort is needed—whether through demonetization, expanding the scope of the FBR, or allowing provinces to collect more taxes—to widen the tax net. Unfortunately, the government seems uninterested in doing the hard work required to tackle these challenges.
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