- Massive Rs17.573 Trillion Outlay: Finance Minister Muhammad Aurangzeb presented a Rs17.6 trillion budget with a 4.2% GDP growth target, emphasizing national and financial security amid Pakistan-India tensions.
- IMF-Aligned Stabilisation Focus: Experts say the budget prioritizes fiscal consolidation over transformative reforms, aiming to meet IMF benchmarks through tax expansion and tariff rationalisation.
- Structural Reforms Missing: Analysts criticized the lack of action on bringing retailers, wholesalers, and agriculture into the tax net, calling the budget disciplined but lacking ambition.
- Mixed Spending Priorities: Development funds heavily favor transport over education and health; tax breaks for real estate and higher levies on non-filers drew concern from economists.
ISLAMABAD — Amid heightened tensions with neighboring India, Finance Minister Muhammad Aurangzeb on Tuesday presented Pakistan’s federal budget for the fiscal year 2025–26 with a total outlay of Rs17.573 trillion and a GDP growth target of 4.2 percent. The presentation, marked by noise and interruptions in the National Assembly, sought to project economic stability and national resilience in a time of geopolitical stress.
“This budget comes at a historic moment,” Aurangzeb declared in his opening remarks, alluding to the recent flare-up with India. He emphasized that “financial security must be ensured with the same seriousness as national sovereignty,” asserting that Pakistan had transitioned from economic stabilization toward a path of prosperity.
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However, experts and economists responding to the budget described it as a cautious, IMF-aligned exercise that lacked bold structural reforms.
Austerity Over Ambition?
Economist Adil Nakhoda pointed out that the government had actually reduced its outlay for the current fiscal year—an unusual move attributed to a decline in interest payments and lower debt-to-GDP ratio. He noted that while an increase in defence spending was expected, tax revenue growth was being pursued by expanding the tax base rather than raising existing rates.
Tariff rationalisation is a central feature, according to Nakhoda, but he warned that any cuts in duties must not be offset by new anti-dumping or countervailing duties. “Transparency in trade reform is key,” he said.
Reforms Promised, But Not Delivered
Macroeconomist Sajid Amin Javed welcomed signs of progress, including simplification of tax filing and the removal of the “non-filer” category. He praised the move toward reducing customs duties to zero over the next few years, calling it a step toward modernising industry and encouraging openness.
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However, he criticised the budget’s lack of structural reform. “This is a typical IMF-backed budget focused on meeting revenue targets rather than transforming the tax system,” he said. Key sectors like wholesale, retail, and agriculture were again left untouched. “It’s a stabilisation budget that falls short of bold action.”
He also questioned the increase in bank withdrawal tax for non-filers from 0.6% to 1%, saying it could undermine financial inclusion.
Disciplined, But Unremarkable
Political economist Uzair Younus described the budget as “unremarkable”—but suggested that may be its most prudent feature. “In today’s fragile environment, avoiding risky fiscal expansion is a virtue,” he said. However, he added, the budget could have been used to signal deeper economic reforms.
Ali Hasanain, associate professor at LUMS, noted that fiscal discipline was a key theme, with the government running a primary surplus and reducing the deficit. “We’re moving out of the debt crisis slowly,” he said, although he lamented the absence of structural reforms.
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Development spending, Hasanain argued, remained misaligned. “Allocating 30% to transport but only 5–6% to education shows misplaced priorities,” he said. He also criticised tax relief for the real estate sector, calling it a counterproductive move that encourages speculation over productivity.
Lack of Direction
Senior journalist Afshan Subohi offered a harsh critique, saying the budget lacked clear direction and boldness. “If modest reductions in income tax or customs duties are being sold as transformative, then the government is setting a low bar,” she said.
She also highlighted the failure to address under-taxed sectors and the lack of a shift toward a more progressive tax regime. “Poor consumers will continue bearing the brunt of indirect taxes,” she warned, citing the increase in Petroleum Development Levy as one such burden.
While digital tax filing and form simplification were appreciated, Subohi pointed out that key budget figures, such as the defence allocation of Rs2.55 trillion, were announced without disclosing the percentage increase—raising concerns about transparency.
A Stabilisation Budget, Not a Reformist One
In summary, the 2025–26 budget was largely received as a cautious, IMF-compliant plan focused on revenue generation and fiscal discipline, rather than a transformative agenda. While it reflects a commitment to maintaining macroeconomic stability amid regional tensions, many observers noted that it misses the opportunity to introduce meaningful reforms that could broaden the tax base, spur investment, and foster inclusive growth.