Budget brings relief after economic stabilization, says Tarar

ISLAMABAD:

Information Minister Attaullah Tarar on Wednesday described the budget for the next fiscal year as “aid-driven”, saying the country had moved from the risk of economic default to stabilization through structural reforms in taxation, governance and enforcement.

On June 12, Finance Minister Muhammad Aurangzeb presented the federal budget for the financial year 2026-2027 in the National Assembly, proposing total federal spending of around Rs 18 trillion and setting an economic growth target of 4 percent. He described the budget as being anchored in “stabilization, reform and growth.”

Aurangzeb said the economy grew by 3.7% in the 2025-2026 financial year despite floods and regional tensions, reaching a size of $452 billion. Per capita income reached $1,901, while large-scale manufacturing recorded its strongest performance in four years.

In a detailed briefing on the 2026-27 Federal Budget, Tarar, speaking alongside Minister of State for Finance, Bilal Azhar Kayani, said the government presented the financial plan after a difficult period of economic uncertainty.

He said the next fiscal year was being approached with a focus on public assistance as well as maintaining macroeconomic stability. He added that engagement with the International Monetary Fund had been crucial to avoiding a default and restoring economic confidence.

Referring to past uncertainties, he said that without progress in negotiations held in Paris, “there was a risk that the country would default.” He added that the Prime Minister personally played a key role in reaching agreements leading to stabilization.

Tarar said reforms in tax dispute resolution had also improved collections, with new courts being established and long-pending cases expedited. He said the removal of stay orders had resulted in significant additional revenue collection, adding: “In the past year alone, enforcement measures generated around Rs 800 billion. »

The minister said these tax gains had enabled the government to introduce a broad package of tax relief measures.

He said salaried earners earning up to Rs 50,000 per month would not pay income tax, while those earning between Rs 50,000 and Rs 100,000 per month would face an income tax rate of around 1 per cent.

He added that additional cuts had been introduced in the highest income brackets to ease pressure on middle-income groups, saying the policy aimed to ensure “the burden does not fall disproportionately on the earning classes”.

A significant part of the briefing focused on reforms to the Federal Board of Revenue (FBR), which Tarar said were key to improving revenue collection and creating fiscal space for tax cuts.

“There were several problems in the FBR,” he said. “Digitalization was stalled, officers were corrupt and postings were made on recommendation. » He said the government had ended influence-based postings and introduced a merit-based system.

He stressed that “appointments are no longer made on recommendation”, warning that any attempt to circumvent procedures would result in disciplinary sanctions. He said civil servants were now assessed through structured assessments and ranked based on merit.

“There is now an anonymous assessment system and no direct contact with customs officials,” he said, adding that customs clearance times have been reduced from weeks to days thanks to automation and digital processing. Under this system, importers and exporters clear goods digitally using goods declaration numbers without direct engagement with customs officials.

Read: Budget 2026-27: FinMin forecasts 4% growth as government unveils its budget, tax and reform program

On tax revenue enforcement, the minister said the government’s anti-evasion measures had significantly increased collections in several sectors, including sugar, tobacco, beverages and cement.

He said the sugar industry had been the first major sector subject to digital surveillance, with production and sales tracked by cameras and barcode systems.

“Production and sales are monitored through an IT system, with barcode and QR code tracking,” he said, adding that the reforms had generated around Rs 60 billion in additional revenue from the sugar sector alone.

He added that the tobacco industry had recorded leakages estimated at around Rs 200 billion, which were being corrected through operations to combat illegal trade.

On housing policy, Tarar said the government had reduced taxes on small real estate transactions and prioritized construction as a driver of economic activity.

He said Rs90 billion had been allocated for the ‘Apna Ghar’ programme, with Rs11 billion already disbursed, adding that the construction activity would generate demand in over a dozen allied industries including cement, steel and construction materials.

He added that export competitiveness had also been enhanced through the removal of advance taxes and super taxes for exporters, as well as a reduction in export refinancing rates to 4 percent, compared to market rates of around 11 percent. He said the measures were aimed at boosting investment, production and employment.

The briefing also highlighted youth-focused programs including agricultural and business loans that are expected to benefit around 550,000 youth. Tarar said investments in skills development and sports initiatives, as well as the expansion of educational institutions such as Danish Schools, were part of a broader human capital strategy.

In agriculture, he said import duties on machinery, including tractors, harvesters, pumps and associated equipment, had been abolished to reduce costs for farmers. He added that financial support would be expanded through lower interest rates under a “Zarakhizi” program, while research institutions would be reformed on the basis of merit.

He also said that around 3.5 million retailers were currently outside the tax net and would be brought into it through a simplified fixed taxation system developed after consultations with trader organizations. Under the scheme, retailers would pay a minimum annual fee of Rs 25,000 and receive formal registration while benefiting from simplified compliance requirements.

Learn more: The money is there, but not in the budget

Tarar confirmed that the Benazir Income Support Program had been expanded to Rs833 billion, supporting more than 10 million families. He said eligibility criteria were aligned with international standards in collaboration with the World Bank and payments were largely made to women in beneficiary households.

He added that the budget also included tax exemptions on reproductive health products for women, aimed at reducing costs and improving access to essential health care.

Regarding the private sector, he said the government had increased the minimum wage by 10 percent and increased public sector salaries, while ensuring that freelancers and IT professionals were not subject to additional taxation. “There is no additional tax burden for freelancers,” he said, describing the IT sector as a priority for growth.

Tarar said Prime Minister Shehbaz Sharif was always ready to provide relief, adding that every segment of the society had been given relief in the budget. He said the government was moving towards export-led growth, while new courts had been formed to improve the resolution of tax disputes.

He said Pakistan was previously in a fragile economic situation in which, as he said, “some government officials even took leave because they did not want a default to occur during their tenure.” He added that at the time “no one was prepared to take responsibility for the economy”, describing the period as one of uncertainty and indecision.

According to Tarar, the situation has stabilized under the leadership of the Pakistan Muslim League-Nawaz. He said the party leadership stepped in during a critical phase and guided economic management, crediting former Prime Minister Nawaz Sharif’s vision and Prime Minister Shehbaz Sharif’s execution of economic policy.

Concluding the briefing, Tarar described it as “a budget focused on reforms and emergency relief, achieved through teamwork”, adding that the government remained committed to long-term economic stability, growth and recovery.