ISLAMABAD – Federal Finance Minister Muhammad Aurangzeb presented the Rs17,573 billion budget for the fiscal year 2025-26 in the National Assembly on Tuesday.
Budget at a Glance
• Total outlay: Rs17,573 billion
• Fiscal deficit: Rs6,501 billion (5% of GDP)
• Defense allocation: Rs2,550 billion
• PSDP (development budget): Rs1,000 billion
• Tax revenue target: Rs14,131 billion
Key Announcements
• 10% salary increase for govt employees, 7% pension hike
• Income tax cuts:
o 5% → 1% for salaries between Rs600,000–1.2 million
o 15% → 11% for incomes up to Rs2.2 million
o 25% → 23% for Rs3.2 million earners
• 30% disparity allowance for Grade 1–16 employees
Economic Targets
• GDP growth: 4.2%
• Inflation: 7.5%
• Remittances: $39.4 billion
• Exports/Imports: $35.3bn / $65.2bn
• Current account deficit: $2.1 billion
Sectoral Reforms
• Power sector: Privatization of DISCOs (Faisalabad, Gujranwala, Islamabad) completed; NTDC split into three entities.
• FBR overhaul: Tax-to-GDP ratio boosted via automation and anti-evasion measures.
• Subsidies: Rs1,186 billion allocated, including Rs593bn for BISP.
Finance Minister Senator Muhammad Aurangzeb, after receiving permission from the Speaker, at the beginning of his speech said that I thank the Prime Minister and other political leaders, this budget is being presented in extraordinary circumstances when the nation has shown great unity, the nation’s unity against India will be remembered as a golden chapter in history.
He said that now our focus is on economic stability and development, we will stabilize the economy and ensure public welfare with the same sincerity and courage, in the past one and a half years we have successfully carried out the journey of development and economic reforms and strengthened the future while providing stability to the economy. ‘We want to build an economy whose benefits reach every class directly and development reaches every person’s doorstep.’
He informed that we have made progress in every sector during this period and are hopeful that the volume of remittances will reach $37 billion by the end of the current fiscal year, the country is moving towards sustainable development.
The Finance Minister informed that regarding FBR revenues, we have made great progress in this sector in the past one and a half years, we were deprived of more than half of the taxes and it was necessary to fill this gap, it was impossible to improve the economy without transforming FBR.
He informed that approval was given for the foundation of a project under the supervision of the Prime Minister. After which revenues increased. We collected Rs78.4 billion in revenues which were difficult while the issue was resolved through ADR in courts, resulting in Rs77 billion being received by the national treasury. Deep and fundamental reforms in the power sector are necessary, Finance Minister.
The Finance Minister said that major reforms in the power sector are necessary under which losses worth billions have been reduced while the privatization process of electricity companies of Faisalabad, Gujranwala and Islamabad has been completed. He said that the electricity transmission company NTDC has been divided into three parts, world-class individuals will be appointed in these institutions. He said that we have formed boards which are non-political whose expenses and losses have been reduced by Rs140 billion, the process for establishing a free market will start in the next three months.
The federal government has presented the federal budget with a total volume of Rs17,573 billion for the next fiscal year 2025-26 with a deficit of Rs6,501 billion for approval in Parliament.
The budget proposes a 10% increase in salaries of government employees and a 7% increase in pensions, a significant reduction in income tax rates has been proposed for all income slabs of salaried class.
It is proposed to give 30% disparity allowance to employees from grade one to sixteen while it is proposed to reduce income tax rate from 5% to 1% for salaried employees with annual income from Rs600,000 to Rs1.2 million. It is proposed to reduce the tax amount from Rs30,000 to Rs6,000 for employees receiving Rs1.2 million salary. It is proposed to reduce income tax rate from 15% to 11% for employees with income up to Rs2.2 million and from 25% to 23% for those receiving salary up to Rs3.2 million.
Total expenditures for the next fiscal year are estimated at Rs17,573 billion, the target for total gross revenue is proposed at Rs19,298 billion and net revenue target is proposed at Rs11,072 billion while FBR tax collection target is proposed at Rs14,131 billion and non-tax revenue target is proposed at Rs5,147 billion and target to obtain Rs87 billion from privatization of institutions in next fiscal year is proposed.
The Finance Minister informed that Rs2,550 billion have been allocated for defense. The proposed budget deficit of Rs6,501 billion for the next fiscal year is estimated to be 5% of GDP while Rs2,550 billion are proposed to be allocated for defense. Rs16,286 billion have been allocated for current expenditures, Rs8,207 billion for interest payments on loans, Rs1,055 billion for pension payments, Rs1,928 billion for grants and transfers to provinces, Rs1,186 billion for subsidies and Rs289 billion have been allocated for emergency and any natural or unforeseen disaster expenditures.
Rs1,287 billion have been allocated for total development and net lending out of which Rs1,000 billion have been allocated for federal PSDP and Rs287 billion for net lending. For the next fiscal year 2025-26, the economic growth (GDP) target has been set at 4.2% while inflation target has been set at 7.5%.
Export target has been set at $35.30 billion while import target has been set at $65.20 billion, remittance target has been set at $39.4 billion. Current account deficit for the next fiscal year has been allocated at $2.1 billion, export target for next fiscal year has been set at $35.30 billion while import target has been set at $65.20 billion. In the budget, FBR tax collec
