ISLAMABAD: The federal government on Tuesday presented a budget of more than Rs 17.5 trillion (17,573 billion) in the National Assembly (NA) for fiscal year 2025–26.
According to the report, the National Assembly session began under the chairmanship of Speaker Ayaz Sadiq, where Federal Finance Minister Muhammad Aurangzeb presented the budget for the year 2025–26.
The budget session was called at 5 p.m., but it started with a delay of about half an hour. Prime Minister Shehbaz Sharif also attended the meeting. During this, there was a lot of noise from the opposition.
Rs 2,550 billion has been allocated for defense expenditure in the federal budget. All tax slabs have been significantly reduced, giving great relief to the salaried class. However, the opposition continued to protest in the House.
During the budget speech, Finance Minister Muhammad Aurangzeb said that presenting the budget for the fiscal year 2025–26 is a matter of pride for him. This is the second budget of the coalition government.
He thanked Prime Minister Shehbaz Sharif for his leadership and the guidance of the leaders of the coalition parties — Mian Nawaz Sharif, Bilawal Bhutto Zardari, Khalid Maqbool Siddiqui, Chaudhry Shujaat Hussain, Abdul Aleem Khan, and Khalid Hussain Magsi.
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He said, “Mr. Speaker, this budget is being presented on a very important and historic occasion. The nation has shown extraordinary unity, determination, and courage in recent days.
The courage, wisdom, and solidarity shown by our political leadership, the armed forces of Pakistan, and the brave people of Pakistan in the face of Indian aggression will always be remembered in the golden pages of history.”
The Federal Finance Minister said that this victory was not only a magnificent military victory but also a manifestation of the collective consciousness, national dignity, and pride of the entire nation. “I congratulate the military and political leadership of Pakistan here.”
Key features of Budget 2025–26:
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Total expenditure estimated at Rs 17,573 billion
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Rs 8,207 billion allocated for interest payments
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Current expenditure estimated at Rs 16,286 billion
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Government’s net income at Rs 11,072 billion
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FBR revenue estimated at Rs 14,131 billion
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Non-tax revenue target at Rs 5,147 billion
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Rs 1,000 billion allocated for development programs
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Rs 2,550 billion allocated for national defense
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Rs 1,055 billion proposed for pensions
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Rs 1,186 billion allocated as subsidy for power and other sectors
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Rs 1,928 billion allocated for grants
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Out of the current expenditure:
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Rs 140 billion for Azad Kashmir
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Rs 80 billion for Gilgit-Baltistan
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Rs 80 billion for merged districts of Khyber Pakhtunkhwa
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Rs 18 billion for Balochistan
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He said that our forces gave an effective and comprehensive response to the enemy with their professionalism, courage, and spirit of sacrifice, which not only made the defense of our borders impregnable but also raised the prestige of Pakistan in the international community. This great success sent a message that the Pakistani nation is united in every trial and becomes a leaden wall to defend the motherland.
The Federal Finance Minister further said that by utilizing this national determination and solidarity, our attention is now focused on achieving economic stability, development, and prosperity.
With the same spirit with which we have built national security on strong foundations, we have to stabilize our economy and ensure the welfare of the people with the same sincerity and courage.
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He said that during the past one and a half years, we have successfully embarked on the journey of economic recovery, reforms, and development with the spirit of national unity and determination.
By combining economic reforms, fiscal discipline, and development planning, we have not only stabilized the economy but also strengthened the foundations of the future.
The Federal Finance Minister said that this vision drives us forward — towards a Pakistan where progress reaches the doorstep of every individual, and the nation as a whole is prosperous and stable on the path. Lasting prosperity is our commitment, our strategy, and our slogan.
He further said, “Mr. Speaker! We took several important steps last year to improve the economy, which resulted in significant improvement in financial discipline, and we achieved several successes, some of which I would like to mention.”
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Achieving a primary surplus equal to 2.4 percent of GDP
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Significant reduction in inflation to 4.7 percent
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Current account surplus of $1.5 billion expected this year compared to last year’s $1.7 billion deficit
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Stability in the value of the rupee
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Remittances increased by 31% in the first 10 months of the current fiscal year to $31.2 billion. We are hopeful that the volume of remittances will reach $38 billion by the end of the current fiscal year
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The State Bank’s foreign exchange reserves have increased by $2 billion. By the end of the current year, these reserves will reach $14 billion
He said that the government had to take tough decisions for economic improvement. The brave people of Pakistan also made many sacrifices, which yielded positive results. The success of our macroeconomic stabilization program has been recognized internationally. Similarly, global financial institutions, rating agencies, and domestic and foreign surveys are testifying to the improvement in the economy.
Similarly, according to PwC, business leaders’ confidence in the improvement in the economy has increased from 49% to 83%. This confidence can also be heard among foreign investors doing business in Pakistan, according to the Overseas Chambers of Commerce, where the Business Confidence Index has seen a historic improvement.
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Federal Minister for Finance said that recent economic surveys show clear improvement in Pakistan’s economy. He said according to Gallup, household financial outlook improved by 27.5% in the last quarter alone. A survey by IPSOS also shows that public expectations about Pakistan’s future are at a six-year high.
He added that the international rating agency Fitch has upgraded Pakistan’s rating from ‘CCC+’ to ‘B-’, showing signs of economic recovery. Another agency, Moody’s, also noted improvement in the economy.
The Finance Minister said that major international institutions such as the Asian Development Bank, World Bank, and IFC have shown confidence in Pakistan’s economy and announced significant funding for the country.
FBR Reforms Aimed at Increasing Tax Revenue
Talking about reforms, the Minister said Pakistan’s biggest economic challenge was the weak tax system. The country’s tax-to-GDP ratio was only 10%, which was not enough to cover development and administrative expenses.
According to FBR, the estimated tax gap is Rs 5.5 trillion, meaning over half of the potential tax is not being collected. He said it was necessary to close this gap and increase the tax-to-GDP ratio to 14%.
He said it had become clear that the FBR is the key to solving this issue. Without reforms in FBR, economic stability and national goals could not be achieved. Therefore, under the Prime Minister’s leadership, a reform plan was approved in September 2024, focusing on three pillars: public trust, development, and technology.
Digital Reforms Introduced for Better Tax Collection
He said the reform plan is mainly based on digital solutions. For the first time, a strong link is being made between the economy and the tax system through digital tools.
Key steps include:
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Digital production tracking started with the sugar sector and now extended to cement, beverages, fertilizer, and textile.
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Launch of nationwide e-invoicing to document business transactions.
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Use of AI-based audit selection for income and sales tax.
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E-way billing system to track goods transportation.
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Faceless audit system in customs to reduce corruption.
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Digital workflows and regulatory alerts for officers.
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A central control unit to manage all data.
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Restructuring of the Federal Board of Revenue (FBR) with a clear technology mandate.
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Human Resource Development Also a Focus
The Minister said they are also investing in human resource development. New auditors have been hired and experts placed in key departments for training and guidance.
Officers are being trained in audit, law, and digital skills. Top legal firms have been hired for complex court cases. Promotions and rewards are now based on performance, professionalism, and integrity instead of just seniority.
Encouraging Early Results
He shared some positive early results:
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47% increase in tax collection from the sugar sector.
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Identification of 390,000 high-value non-filers, recovering Rs 300 million.
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Rs 9.8 billion worth of fake refund claims blocked using fraud analytics.
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Over 200 cases worth Rs 13.3 billion identified through the AI audit system.
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Law-abiding importers now getting easier customs clearance through faceless audit.
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Number of tax filers and taxpayers doubled, and revenue increased from Rs 45 billion to Rs 105 billion.
Simplified Tax Return from July
He announced that starting July 1, the current 800-column tax return will be replaced with a simple form requiring only seven basic details. This user-friendly form is specially designed for salaried individuals and small businesses, making it easier to file taxes without needing a lawyer or tax expert.
Federal Finance Minister Muhammad Aurangzeb has said that, for the first time in Pakistan’s history, the International Monetary Fund (IMF) has officially recognized Rs389 billion in revenue collected through enforcement of tax laws.
“This is a strong sign of the strength, reach, and credibility of our reform efforts,” he said during his budget speech in the National Assembly. “In simple words, it shows IMF’s trust in Pakistan’s reforms.”
He criticized those claiming a mini-budget was being introduced. “I respectfully say to those friends: there is no mini-budget and no new taxes have been added,” the minister said.
He added that many taxpayers try to avoid paying taxes by going to court, and due to weak legal follow-up, such cases remain pending for years, delaying government revenues. “This year, due to better legal efforts, FBR successfully recovered Rs78.4 billion,” he said. “I thank our legal teams and the judiciary for this achievement.”
He also mentioned that another case was resolved through Alternative Dispute Resolution (ADR), adding Rs77 billion to the national treasury.
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Energy Reforms Aim to Reduce Costs, Improve Power Sector
Talking about energy reforms, the finance minister said the power sector plays a key role in economic growth. “We have reduced electricity prices by over 31% for the industrial sector,” he said, adding that over 18 million poor and protected consumers are getting more than 50% relief in their bills.
He said the government reviewed agreements with Independent Power Producers (IPPs), saving over Rs3,000 billion. “We have also shut down old furnace oil power plants with 3,000 MW capacity that were harmful to the environment.”
He said deep reforms in the power sector are necessary. “We have almost completed the privatization process of three power distribution companies — Faisalabad, Gujranwala, and Islamabad — and fulfilled all necessary steps.”
To improve electricity transmission, the government has restructured NTDC into three new companies. “These companies will plan and implement future projects to remove bottlenecks in the power supply system,” he said, adding that international-level professionals will run these companies.
He also shared that professional boards now manage power distribution companies, free from political interference. “In the last nine months, these boards have reduced financial losses by Rs140 billion,” he said. “Our goal is to eliminate these losses completely within the next five years.”
Laws and regulations to create a competitive and open electricity market have been finalized, and implementation will start in the next three months. He added that, for the first time, Pakistan has approved energy-saving building codes, and all federal and provincial departments have been instructed to follow them in future construction.
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He said a detailed plan has been made to ensure cheap electricity in the future. “We have saved over Rs4,000 billion so far by cancelling plans for 9,000 MW expensive power plants,” he said. “Old power plants owned by the government have been shut down, and the process of selling their surplus equipment has started to reduce the Rs7 billion yearly burden on the treasury.”
Oil & Gas Sector Sees Reforms and Foreign Investment
Aurangzeb said major reforms have been introduced in Pakistan’s oil and gas sector in recent years. These reforms helped increase investment and diversify strategies.
He said foreign companies, especially Turkish Petroleum, have shown strong interest in exploration and production (E&P), which is a good sign after many years of slow activity. “For the first time in over a decade, we launched the Pakistan Offshore Exploration Bid Round 2024,” he said.
This move revived E&P activity in the offshore sector, and recent oil and gas discoveries have helped reduce imports and improve energy security. “E&P companies have committed to invest over $5 billion in future exploration,” he said. “They are also focusing on using modern technologies to improve existing oil and gas fields.”
The finance minister added that reforms in the 2012 Petroleum Policy and Tight Gas Policy — including fair pricing — have made the sector more competitive.
The government has said that Pakistan’s Refining Policy 2023 has brought positive momentum in the refining and downstream sector. It has helped with Euro-V upgrades and capacity expansion. Steps are also being taken to deregulate fuel prices to encourage competition and private investment.
The finance minister said the Reko Diq copper and gold mines are an important national asset. The government is focused on making full use of it. The feasibility study of the project was completed in January 2025. The mining phase is expected to last 37 years and could bring over $75 billion in cash flows to the country. Around 41,500 jobs will be created during the construction phase.
He added that the project will bring major social and economic development through community programs, local buying, environmental protection and support. The government expects to earn $7 billion in taxes and $7.8 billion in royalty from it. Infrastructure like roads and rail lines from Reko Diq to Port Qasim and Gwadar is being built to ease exports. This project is being called a game changer for Pakistan’s economy.
Tariff Reforms to Boost Exports, Investment
The finance minister said the government is committed to creating a business-friendly environment, encouraging investment, and boosting exports. The commerce ministry has taken several steps to promote a competitive and export-led economy. A full package of tariff reforms is being introduced to support economic growth and make export easier.
According to the minister, under the Prime Minister’s instructions, the following reforms will be part of the National Tariff Policy 2025-30:
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Additional customs duty will be removed in 4 years.
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Regulatory duties will end in 5 years.
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The 5th Schedule of the Customs Act 1969 will be phased out in 5 years.
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Only four customs duty slabs will remain: 0%, 5%, 10%, and 15%.
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The maximum customs duty rate will be capped at 15%.
These reforms will be introduced step by step to avoid disturbing businesses. Key sectors like pharmaceuticals, IT and telecom, textiles, and engineering will benefit from these changes.
The minister added that, according to the World Bank, after these reforms, Pakistan’s average tariffs will be the lowest in the region, and we will be at the same level as countries like Vietnam and Indonesia. He said the government is confident these reforms will bring positive results and support the country’s economic growth.
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Better Management of Debt Brings Results
The finance minister said that for the last 20 years, Pakistan’s economy has remained burdened by debt. However, better financial discipline has now helped reduce the country’s debt-to-GDP ratio from 74% to below 70%. He said the government is working to bring it down further.
He shared the following achievements:
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Under Pakistan’s first Debt Buyback Program, Rs1 trillion worth of loans were bought back.
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A refinancing program helped save over Rs850 billion in mark-up.
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The average maturity time of debt was increased by 66%, which reduced refinancing risk and improved financial stability.
Pakistan Ready to Launch First Panda Bond
The finance minister said Pakistan is working to increase the variety of its debt products to attract more investors. A Sukuk bond has already been launched through the Pakistan Stock Exchange, and more products are under consideration.
Pakistan is also preparing to issue its first Panda Bond to enter China’s capital market. The Debt Management Office (DMO) is being restructured to meet international standards.
Protests in National Assembly, Demands for Pay Raise
In the National Assembly session, PTI Chairman Barrister Gohar arrived, and PTI members held protest placards.
MQM leader Farooq Sattar told media outside Parliament that the budget should be people-friendly and government employees should get a 20% salary increase.
When asked by a journalist what the public should expect from him, PML-N leader Rana Sanaullah replied, “Let the finance minister speak on such matters. InshaAllah things will get better. I can’t say anything before the budget speech.”
