Budget Estimates 2025-26: Pakistan’s Economic Outlook and Fiscal Strategy
Overview of Budget Estimates 2025-26
The Government of Pakistan is preparing to unveil its Federal Budget for the fiscal year 2025-26, focusing on fiscal consolidation, strategic development, and economic reform. The upcoming budget aims to balance growing public demands with the country’s commitment to IMF conditions, controlling inflation, enhancing revenue, and ensuring social protection.
💸 Revenue Targets
Pakistan’s total revenue for 2025-26 is projected to reach nearly Rs 20 trillion, supported by tax reforms, improved economic activity, and inflation management. The Federal Board of Revenue (FBR) is expected to increase its tax collection with measures targeting the undocumented economy and digitalization of the tax system.
📉 Fiscal Deficit and Surplus
The government targets to reduce the fiscal deficit to 5.1% of GDP, a positive step compared to the previous year’s 5.6%. A primary surplus of Rs 2.1 trillion is expected, which reflects strong fiscal discipline and aligns with debt sustainability goals.
🛡️ Defense and Security Budget
In light of regional security tensions, particularly after recent cross-border incidents, the defense budget is expected to see a significant 18% increase, totaling over Rs 2.5 trillion. This allocation will ensure the country’s defense readiness and national security enhancement.
🏗️ Public Sector Development Programme (PSDP)
The PSDP allocation for 2025-26 is estimated at Rs 921 billion. Although this is below the Planning Ministry’s recommended Rs 1.6 trillion, the government aims to prioritize high-impact infrastructure, energy, and health projects. Strategic investments in CPEC-related initiatives and climate resilience will be central.
🌍 Exchange Rate Assumptions
The budget assumes an average exchange rate of Rs 290 per USD, reflecting cautious optimism on currency stability. This assumption will influence foreign debt servicing, import payments, and defense procurements.
📊 Economic Growth Outlook
The economy is forecasted to grow at 3.6%, supported by agriculture recovery, industrial growth, and expanding exports. Inflation is estimated to average 7.7%, down from recent highs, which will support purchasing power and private sector investment.
📦 Subsidy Reforms and Climate Budgeting
To enhance transparency and meet international commitments, climate tagging of subsidies is being introduced. Ministries will report environment-related expenditure, aligning fiscal policy with climate change mitigation and adaptation goals.
📈 Tariff and Tax Policy Changes
The first phase of the National Tariff Policy 2025–30 will be rolled out. This includes simplifying import tariffs by reducing slabs from five to four and gradually lowering the maximum tariff rate to 15%. These reforms aim to boost industrial competitiveness and exports.
✅ Conclusion
Pakistan’s Budget Estimates 2025-26 reflect a challenging yet progressive fiscal path. With key focus areas such as defense strengthening, economic growth, deficit reduction, and climate accountability, the government aims to lead the country toward sustainable development. The upcoming budget will be pivotal in restoring investor confidence and stabilizing the economy amid global and regional uncertainties.
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