ISLAMABAD:
The government is set to unveil a massive Rs17.5 trillion (approximately $61 billion) consolidated budget for the fiscal year 202627 on Friday (today) to meet strict International Monetary Fund austerity conditions.
The framework sets an ambitious Federal Board of Revenue tax target of Rs15.267 trillion and targets a 4.1% GDP growth.
The high-stakes spending plan balances fiscal tightening and IMF structural directives while introducing relief measures for the poorest citizens and modest salary bumps for government workers.
The budget comes as much of the population continues to feel the effects of the Iran-US war, with no indication that the conflict is easing.
The government will propose measures to raise revenue and cut spending while shielding the nation’s poorest.
Under pressure to meet austerity conditions from the International Monetary Fund, Finance Minister Muhammad Aurangzeb will submit a delayed Rs17.5 trillion ($61-billion) spending plan for the fiscal year starting next month in the National Assembly.
The budget had been formulated while considering the existing challenges being faced by economy at domestic and international fronts.
In addition to fiscal management, revenue mobilization, measures for economic stabilization and growth, reduction in non-development expenditures, job creation and people-friendly policies for the socioeconomic prosperity of the country would feature in the budget.
The burden of higher fuel and power costs and taxes 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 conditions from the latest IMF bailout package but also an outsized impact from the US-Israeli war on Iran – a conflict Islamabad has sought to mediate.
The surge in oil prices sparked by the war has driven Pakistan’s inflation back to double digits just as the economy had appeared to be finding its footing.
The government is aiming for fiscal 2026-2027 economic growth of 4.1%, up from this year’s projected 3.7% and above the IMF’s 3.5% forecast, and is targeting 8.2% full-year inflation, well below the 11.7% reported for May.
But business confidence was the lowest in May since S&P began its manufacturing survey last year, while input costs hit 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 pressing the Federal Board of Revenue to raise next year’s tax collections to 37% above the target for this year – which the agency is set to miss.
The extensive unofficial economy keeps much of Pakistan’s cash beyond the FBR’s reach: just 1.3% of Pakistanis filed returns showing taxable income last year, and just 7.7% of adults hold a debit or credit card.
The number of tax filers has risen, but revenue has not kept pace. Corporate tax rates are already high by global standards, while raising income tax would crush purchasing power still recovering from two years of inflation.
Spending on economic development is feeling the squeeze: Planning Minister Ahsan Iqbal said no new projects would be launched in the coming year except for defence and interior policies.
The budget is expected to protect the poorest citizens by providing them with cash transfers. The government has not explained the one-week delay in submitting the budget.
