As multiple external and internal shocks rock Pakistan’s economy, the federal government is set to present the much-awaited annual budget today.
Finance Minister Muhammad Aurangzeb will table the 2026-27 finance bill in the National Assembly, then in the Senate.
This comes a day after Aurangzeb unveiled the Economic Survey 2025-26, showing that Pakistan’s gross domestic product (GDP) reached its highest level ever, but the South Asian nation missed its growth target due to external shocks.
As the government is all set to unveil the budget today, here is a one-stop guide to all the financial terms to help you understand the outlines of the Finance Bill.
GDP
Gross domestic product or GDP is the total monetary or market value of all finished goods and services produced within a country’s borders during a given period.
PSDP
The Public Sector Development Program (PSDP) is an important public intervention aimed at stimulating private investment by developing human capital and improving infrastructure. The PSDP is aligned with the government’s overall long-term development objectives.
Income
The revenue budget details the sources from which government revenue comes. Revenue can be classified into tax revenue and non-tax revenue.
- Tax revenue: all revenues from taxes on income and profits, social security contributions, taxes levied on goods and services, payroll taxes, taxes on property and transfer of ownership and other taxes.
- Non-tax revenue — this is recurring revenue earned by the government from sources other than taxes; these include royalties, dividends on government investments in state-owned enterprises, etc.
Oil tax
A federal tax imposed on petroleum products such as gasoline and diesel. Collected by the liter, it is included in fuel prices and is a major source of non-tax revenue for the government.
Spent
Government spending or spending includes all government consumption, investment, and transfer payments. It can further be classified into capital expenditure and revenue expenditure.
- Capital expenditures — the amount spent to create assets, primarily long-term expenses. This is a cause for reducing state debts. It adds to the capital stock of the economy and is non-recurring in nature.
- Revenue Expenses — these are short-term expenses used in the current period or usually within a year.
Budget deficit
This is a shortfall between a government’s revenues and its expenditures. A government that has a budget deficit spends beyond its means.
Funding
Financing is the process of providing funds for business activities, making purchases or investing.
Budget deficit
A budget deficit occurs when spending exceeds revenue and can indicate the financial health of a country.
Debt/GDP ratio
The debt-to-GDP ratio is the measure comparing a country’s public debt to its GDP.
Grants
A subsidy is a benefit granted to the population by the government. This can be direct (like cash payments) or indirect (like tax breaks).
Debt service
Debt service is the cash flow required to cover the repayment of interest and principal on a debt for a given period of time.
Tax/GDP
A tax-to-GDP ratio is a figure used to assess a country’s tax revenue in relation to the size of its economy, measured by GDP.
