ISLAMABAD:
The government is set to unveil a massive consolidated budget of 17.5 trillion rupees (around $61 billion) for the 2026-2027 financial year on Friday (today) to meet the International Monetary Fund’s strict austerity conditions.
The framework sets an ambitious Federal Board of Revenue tax target of Rs 15,267 billion and targets GDP growth of 4.1%.
The high-stakes spending plan balances fiscal tightening and IMF structural guidelines while introducing relief measures for poorer citizens and modest pay increases for civil servants.
The budget comes as much of the population continues to feel the effects of the war between Iran and the United States, with no sign that the conflict is easing.
The government will propose measures to increase revenue and reduce spending while protecting the country’s poorest.
Under pressure from the International Monetary Fund to meet austerity conditions, Finance Minister Muhammad Aurangzeb will present to the National Assembly a delayed 17.5 trillion rupee ($61 billion) spending plan for the fiscal year starting next month.
The budget has been formulated keeping in view the existing challenges facing the economy on the domestic and international fronts.
Apart from fiscal management, the budget would include revenue mobilization, economic stabilization and growth measures, reduction in non-development expenditure, employment generation and people-friendly policies for the socio-economic prosperity of the country.
The burden of rising costs and taxes on fuel and electricity will fall largely on formally registered businesses and salaried workers, as politically powerful sectors such as agriculture, retail and real estate remain difficult to tax, experts say.
Policymakers must contend not only with the terms of the latest IMF bailout, but also with the outsized impact of the US-Israeli war against Iran – a conflict that Islamabad has sought to mediate.
The war-induced surge in oil prices brought inflation in Pakistan back to double digits just as the economy appeared to be finding its balance.
The government is targeting economic growth of 4.1% for the 2026-2027 financial year, up from 3.7% projected this year and above the 3.5% forecast by the IMF, and is targeting inflation of 8.2% for the whole year, well below the 11.7% forecast for May.
But business confidence was at its lowest in May since S&P began its manufacturing survey last year, while input costs rose to a 21-month high and employment fell for a second month.
The central bank raised interest rates by a percentage point in April, its first increase in almost three years. The government is pressuring the Federal Board of Revenue to increase next year’s tax revenues to 37% above this year’s target – something the agency won’t miss.
The large unofficial economy keeps much of Pakistan’s cash beyond the reach of the FBR: only 1.3 percent of Pakistanis filed a return showing their taxable income last year, and only 7.7 percent of adults own a debit or credit card.
The number of filers has increased, but revenue has not kept pace. Corporate tax rates are already high by global standards, while an income tax increase would crush purchasing power still recovering from two years of inflation.
Spending on economic development is under pressure: Planning Minister Ahsan Iqbal said no new projects would be launched next year, except for defense and domestic policies.
The budget should protect the poorest citizens by providing them with cash transfers. The government has not explained the one-week delay in presenting the budget.
