The NA session has been adjourned till 11am Wednesday (tomorrow).

Finance Minister Muhammad Aurangzeb presented the bill in the House, which includes several government-backed amendments, during a budget session marked by heated protests from opposition parties.

Amendments proposed by Aurangzeb were accepted, while all opposition-proposed amendments were rejected, said Aaj News.

Days ago, Aurangzeb unveiled a Rs18.77 trillion federal budget for fiscal year 2026-27, extending relief to the salaried class and tax incentives to exporters, real estate, and construction sectors to revive industry, promote investment, and steer the economy towards a 4% growth target.

Despite facing an estimated revenue shortfall of around Rs1 trillion in the outgoing fiscal year, the government set an ambitious revenue target of Rs15.264 trillion for FY2026-27. Against the revised revenue estimate of Rs12.983 trillion for the current fiscal year, the target reflects a robust 17.6% growth in revenue collection for the next year.

Shortly after the budget presentation, the Federal Board of Revenue (FBR) released the Finance Bill 2026-27. On the same day, the Finance Minister moved a copy of the proposed Finance Bill 2026 in the Senate.

On June 15, the Senate commenced its debate on the proposed federal budget.

The National Assembly Standing Committee on Finance on Sunday cautioned the government against introducing legislative amendments without adequate technical examination and parliamentary scrutiny under the Finance Bill (2026).

The committee seriously observed that last-minute changes could compromise legislative quality, create legal ambiguities, and lead to implementation challenges.

Chairman Syed Naveed Qamar emphasised that a balanced and sector-neutral framework would not only enhance competition but also contribute to a stronger, more resilient, and efficient aviation industry.

CM Murad commenced the budget speech, for the thirteenth time, amid ruckus from the opposition lawmakers, who later staged a walkout from the provincial assembly.

“No new taxes have been imposed in the budget, reflecting the government’s commitment to providing relief to the public and the business community,” he said.

“Recent regional developments have once again demonstrated Pakistan’s role as a voice of peace, stability and principled diplomacy,” said CM Murad.

He said the budget was being presented at a time when the global economy continued to face uncertainty arising from geopolitical tensions, disruption in international trade, volatility in markets and inflationary pressures.

Current Revenue Expenditure

In case of Current Revenue Expenditure (CRE), the provincial government proposed Rs2.56 trillion for FY2026-27, with 20% increase over last year’s estimates.

The Budget Estimates (BE) 2026-27 for the development expenditure were proposed to be Rs720.385 billion, recording a decline of 30% over the last year’s development portfolio of Rs1,018.326 billion.

“The decrease will be absorbed by all development components.” CM Sindh.

“The prevailing regional security situation has necessitated higher national expenditures on defence and strategic preparedness, thereby reducing the fiscal space available for development spending across all tiers of government. At the same time, volatility in global energy markets and recurrent fuel crises have increased the cost of government operations, infrastructure projects, transportation, and service delivery, placing additional strain on public finances.”

BE2026-27 in relation to (CRE) some of the important sectors are as under:

• Rs216.537 billion for the Law & Order, Jails and Policing in province;
• Rs27.565 billion for Law and Parliamentary Affairs;
• Rs38.22 billion for Agriculture sector
• Rs11.6 billion for Livestock & Fishries sector;
• Rs41.1 billion for Irrigation sector;
• Rs66.48 billion for Energy sector;
• Rs18.291 billion for Works and Services;
• Rs201.39 billion for Local Government Services;
• Rs8.18 billion for Public Health Engineering activities;
• Rs354.271 billion for Health Services;
• Rs10.856 billion for Information & Publicity
• Rs446.958 billion for School Education Services including Primary, Middle, Secondary, H: Secondary, Rs41.414 billion for Colleges, Rs9.417 billion for Universities & Boards;
• Rs133.54 billion for Subsidies for next FY2026-27, and;
• Rs54.25 billion for Debt Servicing and Interest Repayment

Sectoral allocations for Annual Development Programme (ADP) 2026–27:

Allocations for major sectors and departments are summarised as follows:

• Education sector: Rs25,860.679 million (approximately 6.80% of total ADP size)
• Health sector: Rs17,433.422 million (approximately 4.60% of total ADP size)
• Local government including Mega — Water & Sanitation and Roads: Rs121,663.861 billion (approximately 26.2% of total ADP size)
• Public health engineering & RD: Rs40.86 billion (approximately 10.70% of total ADP size)
• Agriculture (including Livestock): Rs6.30 billion (approximately 1.66% of total ADP size)
• Irrigation: Rs30.94 billion (approximately 8.14% of total ADP size)
• Transport & Communication: Rs39.536 billion (approximately 10.4% of total ADP size)

The Benazir Hari Card Programme, which received Rs8.0 billion in FY 2025-26, continued with an allocation of Rs3 billion in FY 2026-27. The Sindh Peoples Support Programme and Benazir Housing initiatives continue to receive allocations of Rs2.0 billion each.

Sindh Sales Tax on Services

For promoting education support services (including educational consultancy for students, testing & evaluation services), the rate of sales tax was proposed to be reduced to 5%.

The existing relief of reduced rate of 5% sales tax on recruiting agent services for overseas employment of Pakistani workers was proposed to be continued for further two years.

For promoting documentation and digitalisation in the retail sector, the Point of Sale (POS) integration by beauty parlors/salons was proposed to be made mandatory henceforth while such services shall continue to be levied at the reduced tax rate of 8%.

Relief was proposed in relation to the rate of super tax on agricultural income by increasing the exemption threshold from Rs150 million to Rs500 million and also reducing the rate from 10% to 8%.

7% increase in salary and pension

The provincial government has proposed a 7% increase in salaries and pensions of government employees, and a range of relief measures aimed at supporting households, farmers and businesses.

Minimum wage raised

The minimum monthly wage in the province has been raised to Rs43,000.

Rs100bn allocated for Karachi

CM Murad said that the Sindh government is paying “special attention” to the development projects in Karachi.

“Rs 100.19 billion has been allocated for Karachi in the fiscal year 2026-27,” said the Sindh CM.

“Development projects worth billions for Karachi’s infrastructure, traffic, sanitation, water and education sectors have become part of the budget,” he added.

Shahrah-e-Bhutto extension

CM Murad informed the lower house that the Shahrah-e-Bhutto, which is currently facilitating 25,000 vehicles daily, will be extended from Qayyumabad to Karachi Port.

Opposition leader Ali Khursheedi said, “Urban Sindh was not represented in the budget.”

Earlier, Murad chaired the provincial cabinet’s budget meeting, attended by provincial ministers, advisers, special assistants, the chief secretary,  secretaries and senior officials

The cabinet approved the Sindh Budget 2026-27, reaffirming its commitment to inclusive development, poverty reduction, and public welfare.

Insurance sector

Tax rates on insurance agents and brokers were proposed to be reduced further from 5% to 2% and 3%, respectively.

Some relief was also proposed by increasing tax exemption threshold from insurance coverage of Rs0.5 million to coverage of Rs3.5 million in respect of individual life insurance.

Special measures have been introduced under the guidance of Chairman Bilawal Bhutto Zardari, including support for workers through an increase in the minimum wage.

Sindh CM Murad presents Rs3.45trn provincial budget for FY2025-26

“We will continue serving the people of Sindh and work even harder in the new fiscal year,” said CM Murad.

“On Bilawal Bhutto’s instructions, we are taking special measures to eliminate poverty,” said Murad, saying that the Sindh government has also decided on a minimum wage for labourers in the new budget.

Finance Minister Muhammad Aurangzeb on Friday unveiled a Rs18.77 trillion federal budget for fiscal year 2026-27, extending relief to the salaried class and tax incentives to exporters, real estate, and construction sectors to revive industry, promote investment, and steer the economy towards a 4% growth target.

Addressing the cabinet meeting, the chief minister thanked Almighty Allah for the opportunity to present her third provincial budget.

“Punjab had contributed the highest share to the federal government for defence and other expenditures. Despite receiving a reduced share under the Federal Finance Commission (FFC) award, the provincial government remained determined to provide relief to the people through its own resources,” she said.

Maryam Nawaz said she had continued to participate in meetings through video link even during illness to fulfill her commitment to public welfare and relief measures.

“The journey of public service and relief will continue as before,” she said, adding that there would be no compromise on the development and progress of the people of Punjab.

The CM said the provincial budget for fiscal year 2026-27 was a “budget of hope” aimed at providing relief to the people through the province’s own resources. She acknowledged the entire team had worked as “one unit” to formulate a people-friendly budget, and deserved appreciation for its efforts.

“We had to allocate a substantial share to the federation, which naturally had an impact, but every effort was made to ensure that no additional burden was placed on the public and that the impact on citizens remained minimal,” she said, adding: “Despite financial constraints and challenging global economic conditions, the Punjab government had presented a budget focused on public welfare and prosperity without imposing any new taxes.”

She said the budget’s central focus was public development and relief, expressing confidence that the government would continue to meet the expectations of the people, as it had done in previous years. “I pray that Allah Almighty grants us the ability to serve the people of Punjab with sincerity and dedication,” she added.

Earlier, the chief minister formally approved the provincial budget for FY2026-27 and signed the budget documents after the cabinet endorsed the proposals.

The CM also commended Senior Minister Marriyum Aurangzeb, Provincial Finance Minister Mujtaba Shuja-ur-Rehman and Information Minister Azma Zahid Bukhari for their contributions to the budget process. She further appreciated Chief Secretary Zahid Akhtar Zaman, Finance Secretary Mujahid Sherdil and the entire team involved in preparing the budget.

The chief minister also directed the Punjab Revenue Authority to take further measures to enhance revenue collection.

The cabinet was presented the Rs 5.903 trillion budget for the fiscal year 2026-27.

Provincial Finance Secretary Mujahid Sherdil briefed the cabinet on the budget estimates for the upcoming financial year.

The CM directed officials to enhance provincial resources to finance public welfare projects. For the first time, revenue targets for the Punjab Revenue Authority (PRA) have been increased by 55 percent, while targets for the Excise, Taxation and Narcotics Control department have been raised by 77 percent. Overall provincial own-source revenue targets have been increased by 42.7 percent.

The cabinet approved a seven percent increase in salaries of provincial government employees and a 3.5 percent increase in pensions. It also approved a grant of Rs 22 billion for municipal corporations.

Senior Minister Marriyum Aurangzeb briefed the meeting on the Annual Development Programme and thanked the chief minister for providing guidance despite illness.

During the briefing, it was informed that Rs 31 billion has been earmarked under the Punjab Development Programme for South Punjab and other remote areas. An estimated Rs 300 billion has been allocated for the Chief Minister Rural Sanitation Programme. The government plans to provide 2,000 electric buses across all tehsils of Punjab. A sum of Rs 67.2 billion has been allocated for targeted subsidies aimed at supporting low-income segments of society.

According to the development framework presented to the cabinet, allocations include 9.4 percent for agriculture, aquaculture and livestock; 6.5 percent for climate resilience, environment and sustainability; and 19.3 percent for economic transformation.

The share of e-mobility and transport has been set at 8.9 percent, human capital investment and social development at 30.1 percent, urban and rural infrastructure at 21.2 percent, and youth empowerment, skill development and the digital economy at 4.7 percent. Climate and ecology account for 5 percent of the development portfolio, governance, law and order 10 percent, infrastructure development 16 percent, economic sectors 14 percent, services sector 11 percent, and social sector 44 percent.

The briefing further stated that the Punjab government will spend Rs 100.117 billion through 15 departments on youth-focused initiatives, while Rs 87.039 billion will be spent through 12 departments on programmes promoting gender equality. Under the Katcha Area Development Programme, a total of 53 development projects worth Rs 38.9 billion will be completed. On the instructions of the chief minister, NADRA mobile registration vans have, for the first time, been deployed in Katcha areas to facilitate registration and related services.

Speaking on the occasion, the CM said Punjab had achieved significant and undeniable progress across all sectors during the past two years. She noted that the province had carried out a historic rescue and relief operation during floods. She expressed confidence that the provincial government would overcome financial challenges through teamwork and emphasised that no development project would be compromised.

The chief minister observed that the federal government had not only reduced Punjab’s share but had also placed one category of taxation in IMF documentation. Despite these constraints, she said, the provincial government remained determined and optimistic.

Copyright Business Recorder, 2026

Out of this budgetary allocation, Rs 424.32 billion are earmarked for non-developmental expenditures while an amount of Rs 76.3 billion is set aside for ADP under the health sector. The budgetary allocations for health sector constitute 10-percent of total budget. For ADP schemes for 2026-27, Rs43.10 billion allocated for specialized healthcare and medical education department while Rs 33.20 billion earmarked for health and population.

In the next year budget, sufficient funds are directed towards revamping public sector hospitals and upgrading healthcare infrastructure. In the current year, modern hospitals, cardiology and cancer treatment centres, up-gradation of basic health units, emergency and dialysis health facilities and mental health services were successfully completed,

As per budget document, in the next year budget Rs 20 billion allocated for Nawaz Sharif Institute of Cancer Treatment and Research, Rs 28.94 billion for Jinnah Institute of Cardiology Lahore and Nawaz Sharif Institute of Cardiology Sargodha, Rs 2.45 billion for Punjab Institute of Mental Health, and Rs 5 billion set aside for upgradation of Emergency and Outdoor blocks of Nishter Hospital Multan.

Likewise, Rs 9.30 billion has been earmarked for establishment of 16 Cardiac Surgery Units, Rs 8.31 billion for installation of MRI machines and other facilities like CT Scan, Cath Labs in 29 teaching hospitals and Rs 5 billion set aside for extension in Emergency Services across Punjab.

For the first time in the province history, Neuro Cath Labs under Stroke Initiative are being started for which Rs 1.75 billion have been proposed in the budget.

Moreover, Rs 15.21 billion have been earmarked for D.G. Khan Cancer Hospital while for Children Hospital Bahawalpur, Rs 23.37 billion have been allocated.

Following are the major achievements during FY 2025-26:

Jinnah Institute of Cardiology (JIC), Lahore (PKR 8.84 billion); Nawaz Sharif Institute of Cardiology (NSIC), Sargodha (PKR 8.56 billion); Specialized Medical Equipment for JIC Lahore (PKR 7.701 billion); Specialized Medical Equipment for NSIC Sargodha (PKR 3.84 billion); Installation of Cath Labs in Major Tertiary Care Hospitals (PKR 786 million) for procurement and installation of Cath Labs; Emergency Services Expansion; Human Resource Development, recruitment of 2,011 Rescue EMT interns; Fleet Enhancement (138 Ambulances, 22 Fire vehicles, 9 ultra high-pressure vehicles); Infrastructure Strengthening (35 new Rescue stations); Program for Revamping of BHUs in North and Central Punjab (Phase-II) (PKR 9,594.422 million); Establishment of Cath Labs at Selected DHQs and Development of Allied Facilities in Existing Buildings (PKR 2,090.264 million); Procurement of Ambulances for Referral Services (PKR 1,319 million); Establishment of a New 125-Bedded DHQ Hospital in Chiniot (PKR 977.515 million); Establishment of Thalassemia Centres at Divisional Level (PKR 698.273 million) 2,508 Maryam Nawaz Health Clinics (MNHCs)/BHUs and 115 Maryam Nawaz Hospitals (MNHs)/Rural Health Centres (RHCs).

Copyright Business Recorder, 2026

The FY26-27 budget is the third under Chief Minister Maryam Nawaz Sharif. Officials said it reflects a commitment to pro-people policies and sustainable development, with a heavy focus on targeted public relief, health, and education infrastructure.

Addressing the lawmakers, Mujtaba said that the provincial government, following instructions of the federal government, adopted austerity measures.

He lauded the role of Prime Minister Shehbaz Sharif and Field Marshal Asim Munir on the Iran–US peace agreement, terming it a diplomatic success for Pakistan.

Development expenditure

Mujtaba said that Rs752 billion has been earmarked for development projects in Punjab for FY27, adding that no compromise has been made on the province’s development agenda.

Punjab’s share in NFC

As per the budgetary documents, under the NFC award, Rs4.39 trillion is expected to be transferred to Punjab under the NFC Award in FY27, which is 8.1% higher than the previous year.

Punjab expects to generate Rs 525 billion through the Punjab Revenue Authority and Rs 124 billion from the Excise and Taxation Department, with an estimated surplus of about Rs 910 billion.

From this amount, Rs546 billion will be given to the federal government as a grant under national strategic requirements.

Education

The provincial government earmarked Rs750 billion for education, making 15% of the provincial budget.

The allocation includes funding for the CM Punjab Laptop Programme, under which 110,000 laptops are planned for distribution, the Honhaar Scholarship Programme, and the School Meal Programme, which has been allocated Rs15 billion.

Health

The health sector received an allocation of Rs500.62 billion in FY27.

Key projects include Rs20 billion for the Nawaz Sharif Institute of Cancer Treatment.

The government also allocated resources for Maryam Nawaz Health Clinics.

Salaries and pensions

The provincial government decided to increase salaries of public sector employees by 7% and pension by 3.5%.

Earlier, Chief Minister of Punjab Maryam Nawaz Sharif chaired the 35th meeting of the provincial cabinet to approve the budget for the financial year 2026-27.

The CM stated that despite the reduction in the NFC share, the government was determined to provide maximum relief to the people of Punjab. “There will be no compromise on public welfare, development projects, and the journey toward prosperity,” she said.

Addressing media persons, Aurangzeb said the budget used available fiscal space to support growth and would play a ‘pivotal role’ in achieving economic growth.

“In this budget we have tried to bring all enabling factors to achieve export-led growth,” said Aurangzeb, citing measures such as abolition of advance tax and super tax.

The government proposed the complete abolition of the super tax across six income slabs. For incomes exceeding Rs500 million annually, the super tax rate has been proposed to be reduced from 10% to 8%.

ME crisis to have spillover effect

On the ongoing geopolitical tensions in the region and its impact on the national economy, the finance minister said that the government has so far been effective in managing the situation.

“We hope that this conflict ends sooner than later. However, as the energy infrastructure has been hit and it will have a spillover effect into the next fiscal year,” he said.

Talks with IMF continue

Aurangzeb said Pakistan remains in constant consultation with the International Monetary Fund (IMF) as the country is under a Fund programme.

“As far as the IMF is concerned, since we are in an IMF programme, we remain in constant consultation with them. All discussions are being carried forward with their input. That is a requirement of being in the programme,” he said.

On tax targets, the finance minister said the government remains focused on enforcement, compliance and plugging leakages.

Responding to a query, the finance minister said there was no discussion on imposing taxes on solar panels. “It was never part of the discussion,” he said.

He further challenged journalists to provide a list of the media outlets and reporters who published the reports, to the information minister, promising an inquiry into how the story originated.

To a query, Aurangzeb said that the government would talk with the private sector to impose the minimum wage. The government proposed a 10% increase in the minimum monthly wage, raising it from Rs37,000 to Rs40,700.  

Buffers to mitigate external shocks

Talking about external shocks, Aurangzeb said that the only way to deal with exogenous shocks is by building buffers. “This is the role of a responsible government,” he said.

Talking about tariffs, the finance minister noted that the government was in the second year of the five-year plan “to bring the cost down for intermediate goods and raw materials”.

“This, too, is part of our effort to improve export competitiveness.”

Agriculture remains key

Let me also touch upon agriculture. Agricultural credit and financing have increased by approximately 15% year-on-year and have now exceeded Rs2 trillion, he said.

“More importantly, we introduced the Zar Khaiz Scheme during this fiscal year. This is a very important initiative. One of the reasons commission agents gained such influence over the agricultural sector, particularly over small farmers, is that banks were not stepping up to provide adequate financing,” he said.

“Agriculture remains one of the key pillars of our growth strategy going forward,” he added.

The finance minister said that the government remains focused on reducing the trade deficit involving goods. “But the services are becoming more important as we go forward, especially the IT sector.”

He said that the government decision to reduce income tax on various income slabs has been ‘well received’.

Under the budgetary proposals, tax rate for individuals earning between Rs2.2 million and Rs3.2 million annually has been proposed to be reduced from 23% to 20%.

The tax rate for those earning between Rs3.2 million and Rs4.1 million annually has been proposed to be reduced from 30% to 25%. The tax rate for individuals earning between Rs5.6 million and Rs7 million annually has been proposed to be reduced from 35% to 32%.

Aurangzeb said that the government intends to automate the taxation system, using artificial intelligence (AI), in order to reduce human intervention.

Meanwhile, Minister of State for Finance Bilal Azhar Kayani, sitting alongside the finance minister, termed it a ‘people-friendly budget’, citing measures for salaried class, industrialist, exporter and construction sector.  

Similarly, Minister of Information and Broadcasting Attaullah Tarar termed it a ‘relief oriented’ budget, providing a way forward to economic growth.

Clarification on the retailers’ scheme

Kayani explained that the Rs25,000 figure is not a fixed tax, while the actual tax is 1% of turnover for retailers with annual sales below Rs200 million.

“The Rs25,000 is merely the minimum cash payment. Retailers can adjust withholding taxes against their liability, but they must still pay at least Rs25,000 in cash when filing.

“Therefore, the real tax remains 1% of turnover, while Rs25,000 is simply the minimum amount payable,” he said.

Aurangzeb on Friday unveiled a Rs18.77 trillion federal budget for fiscal year 2026-27, extending relief to the salaried class and tax incentives to exporters, real estate, and construction sectors to revive industry, promote investment, and steer the economy towards a 4% growth target.

Despite facing an estimated revenue shortfall of around Rs1 trillion in the outgoing fiscal year, the government has set an ambitious revenue target of Rs15.264 trillion for FY2026-27.

Against the revised revenue estimate of Rs12.983 trillion for the current fiscal year, the target reflects a robust 17.6% growth in revenue collection for the next year.

Out of the total budget outlay, Rs8,045 billion would be set aside for markup payment, Aurangzeb said in his budget speech.

The finance minister said the economy was expected to grow 4 percent in 2026-27, and average inflation was expected to be recorded at 8.2 percent. He added that the fiscal deficit to GDP would be 3.6 percent of GDP (or Rs5.226 trillion) while the primary surplus would be 2 percent, as it seeks to keep the shortfall within the limit under the International Monetary Fund-mandated fiscal discipline.

However, it also highlighted serious concerns regarding the restoration of sales tax status or the introduction of zero-rating.

“FBR’s collection of Rs13 trillion, as pointed out by the finance minister, is a milestone worth acknowledging. OICCI notes it as such. But the chamber must also state plainly: most of it was collected from those who were already paying,” read the statement.

While the informal economy continued to expand unchecked, it noted that the cash economy has grown from Rs9 trillion last year to Rs12 trillion this year, a 33% surge in a single year.

“That is not a rounding error; it is a policy failure. Inaction on formalisation carries a measurable cost, and this number makes it undeniable,” it said.

OICCI welcomed the partial rationalisation of the super tax, abolition of income slabs between Rs150 million and Rs500 million, and a reduction from 10% to 8% for income above Rs500 million.

“It eases pressure on mid-sized formal enterprises and is consistent with the chamber’s long-standing advocacy. But the core corporate income-tax rate remains unchanged,” it said.

The chamber termed the reduction in withholding and advance tax on export proceeds from 2% to 1.25% a sensible step. Similarly, the rationalisation of advance tax rates in the real estate sector — sections 236C and 236K reduced to flat rates of 2.75% and 1.5% respectively — is a constructive step to revive the economic activity, it said.

Moreover, the IT sector and selected input categories also benefit from targeted relief. “These are good measures, and OICCI commends them,” the OICCI said.

The chamber termed the proposed National Faceless Assessment Centre and system-based assessment regime as the most significant structural announcements in this budget.

“It promises to reduce taxpayer-officer contact, curtail field discretion and lower harassment risk for compliant companies, concerns OICCI members have raised for years. The intent is right; delivery will be what counts,” it said.

The OICCI also raised two areas of ‘serious concern’.

“First, there is no mention of restoration of sales tax status or introducing zero-rating on oil refineries and marketing companies. This is a huge burden on the OMCs, which is also holding back an expansion investment of $6-$10 billion in the refinery sector.

“Second, OICCI is deeply concerned that the budget makes no move to review the Minimum Tax on Turnover under Section 113 or the Alternate Minimum Tax under Section 153 of the Income Tax Ordinance, 2001. These provisions have long distorted the tax burden by imposing tax on turnover rather than profit, particularly in low-margin sectors,” it said.

OICCI also noted that there was an absence of any specific measures to accelerate corporate income-tax or sales-tax refund settlements.

“Pending refunds remain a material liquidity constraint on formal businesses. A clear, time-bound refund mechanism through the Finance Bill would send a strong signal of good faith to the investor community, and the chamber urges the government to deliver one,” it said.

Notably, the salaried group that had been at the receiving end of higher taxation for a number of years saw some relief. However, the income tax threshold of Rs50,000 per month remained unchanged.

The incumbent government’s third federal budget carries a total outlay of around Rs18.77 trillion ($67 billion), reflecting a moderate increase from Rs17.6 trillion in the previous year’s budget, as policymakers attempt to maintain macroeconomic stability while navigating a challenging external environment marred by the Middle East crisis.

Interestingly, inflation target has been set slightly higher at 8.2%, largely attributed to the ongoing Middle East war that has rattled energy markets.

Meanwhile, as per the budget documents, Rs8,054 billion has been earmarked for interest payments in FY27. While Rs17,495 billion has been allocated for the government’s current expenditure in FY27.

According to budget estimates, the government targets GDP growth of 4% in FY27, compared to an estimated 3.7% in the outgoing fiscal year. Sector-wise, agriculture, industrial and services are expected to post growth of 3.6%, 4.5% and 4.2%, respectively, in FY27.

The budget deficit is projected to be 3.6% of the GDP, and a primary surplus of 2%  of GDP.

The budget projects a federal deficit of Rs7.02 trillion.

In his opening statement, the finance minister lauded the role of Pakistan’s armed forces, saying that the defence sector has emerged as a source of earning valuable foreign exchange.

He said the strategic defence agreement between Pakistan and Saudi Arabia is a moment of pride. “Pakistan will always steadfastly stand alongside KSA,” said Aurangzeb.

FBR tax target raised

The FBR has a tax collection target of approximately Rs15.26 trillion for FY27, representing an increase of over 8% compared to Rs14.13 trillion in the outgoing fiscal year.

An amount of Rs8,848 billion has been allocated for provinces from federal revenue.

Meanwhile, non-tax revenues are projected to exceed Rs5.34 trillion in FY27, supported by profits from the State Bank of Pakistan, petroleum levy collections, and proceeds from state-owned enterprises.

The government expects enhanced documentation, increased use of digital invoicing systems, and tighter monitoring of retail and wholesale sectors to contribute significantly towards achieving the target.

Minimum wage up 10%

Aurangzeb admitted inflation has increased the difficulties faced by salaried individuals.

“Recognising these challenges, the government is proposing a 7% increase in the salaries of public sector employees,” he said.

Moreover, a 7% increase in pensions for retired employees is also being proposed. Likewise, it is proposed the minimum monthly wage be increased by 10%.

Relief for the salaried class

The government announced some tax relief for salaried individuals, particularly those in middle- and high-income brackets, amid concerns over the high tax burden on documented income earners.

Under the new measures, the tax rate for individuals earning between Rs2.2 million and Rs3.2 million annually falls from 23% to 20%, while those in the Rs3.2 million to Rs4.1 million bracket receive a reduction from 30% to 25%.

For high-income individuals, earning between Rs4.1 million and Rs5.6 million will now pay 29% income tax, as compared to 35% last year. Similarly, individuals earning between Rs5.6 million and Rs70 million annually will now pay 32% in taxes, as compared to 35%.

Moreover, the government has abolished the 9% surcharge on high-income individuals. “These measures will reduce the burden on the salaried class,” said Aurangzeb.

The government has proposed the removal of the first six super tax slabs. Furthermore, income exceeding Rs500mn will now be subject to a super tax rate of 8%, compared to the previous rate of 10%.

Relief for the construction sector

To support construction activity, the government has proposed reducing withholding tax rates on property transactions. For filers, the tax on property purchases has been reduced from 2.5% to 1.5%, said Aurangzeb, while the tax on property sales has been reduced from 5.5% to 2.75%.

“We believe that construction activity will boost from this measure,” said Aurangzeb.

Moreover, the government has abolished the Capital Value Tax (CVT) on the holding of foreign assets.

PSDP

The government allocated around Rs1 trillion under the Public Sector Development Programme (PSDP), with priority areas including water infrastructure, transport connectivity, energy transmission projects, digital transformation, and climate resilience initiatives.

Defence spending rises

In light of evolving regional security dynamics and heightened geopolitical tensions, defence spending registered another increase.

“Defence spending has been increased considerably to make the country invincible due to the uncertainty in the region,” Aurangzeb said.

The government allocated more than Rs3 trillion for defence in FY27, compared to Rs2.56 trillion in the previous fiscal year, reflecting a continued focus on military preparedness amid an increasingly uncertain regional environment.

Defence as a percentage of GDP stands at 2.1% in FY27E compared to the FY26 revised estimate of 2.03% of GDP.

The government has allocated Rs1,169 billion for pension expenses in FY27.

BISP allocation increased

The government raises the allocation for the Benazir Income Support Programme (BISP) to around Rs838 billion for FY27, up 17% as compared to last year, reflecting efforts to shield vulnerable segments of society from inflationary pressures.

The government has allocated Rs365 billion for the transport sector, including Rs100 billion for the N-25 expressway.

The government has earmarked Rs116.2 billion for the power sector.

Talking about climate change, the finance minister noted that last year’s floods dented Pakistan’s economy with losses to the tune of Rs822 billion. The government has allocated Rs103.1 billion for 43 hydro projects, including Rs14 billion for Diamer Bhasha and Rs10 billion for the K-IV project in Karachi.

Education and health

The government has earmarked Rs25.1 billion for the health sector under the Annual Development Programme 2026-27 (ADP), including tertiary healthcare and critical care. Meanwhile, under the ADP, Rs46 billion has been allocated for higher education and research, which is higher than the Rs34.9 billion allocated last year.

Exemption for the IT sector

The government has announced to extend the income tax exemption for the IT sector until June 2029.

Meanwhile, the government has decided to lower the tax collection on export proceeds from the existing 2% to 1.25%.

Taxes on contraceptives eliminated

In a bid to control population, which has crossed the 250 million mark, the government has decided to abolish taxes on contraceptives, announced Aurangzeb.

It has also eliminated the Federal Excise Duty (FED) on international business-class travel. “This measure will help in attracting foreign investment,” said Aurangzeb.

FED imposed on POL solvents

The government, in a bid to curb adulteration, has imposed a Federal Excise Duty (FED) of Rs80 per litre on petroleum-based solvents, particularly petroleum naphtha, which are primarily used in paints and thinners.

“These petroleum-based solvents are widely used for the illegal adulteration of petrol. The objective of this measure is not only to discourage such unlawful activities but also to deter those who harm the national economy by producing adulterated fuel at a lower cost and selling it in the market,” said Aurangzeb.

FEDs on SUVs

The government has imposed Federal Excise Duty on imported SUVs with engine capacities exceeding 2,000cc and up to 3,000cc. It has also proposed to increase the duty on vehicles above 3,000cc.

The tax will be imposed on luxury EVs worth over Rs20 million.

Aurangzeb said through telecom digital wallets, the government is easing public investment in government schemes. “In a week or two, we are inaugurating a project in this regard,” he said.

He said tax compliance and enforcement would ensure an increase in tax revenue collection instead of an increase in taxes.

The finance minister said that the government has provided the enablers “towards that journey from stabilisation to sustainable growth”.

He said the government that achieving stability is “is just the start of the journey”, expressing hope that the announced measures will put Pakistan towards a path of sustainable growth.

The government had earlier indicated that the announcement would be made on June 10 after revising the schedule from its initial plan.

The budget comes at a time when Pakistan remains under a multi-billion-dollar IMF programme, requiring the government to sustain fiscal discipline, broaden the tax base, reduce untargeted subsidies, and improve revenue collection.

At the same time, escalating tensions between the United States and Iran continue to add uncertainty to global energy markets, raising concerns over oil prices and import costs for Pakistan, a major energy-importing nation.

The government says it is closely monitoring developments in the Middle East amid fears that any prolonged disruption in regional trade routes could adversely impact Pakistan’s external account and inflation outlook.

Pakistan’s financial markets had also anticipated a friendlier, growth-oriented budget, talks suggested, with the KSE-100 ending the session up by nearly 2,700 points. Additionally, with the economy now having stabilised according to government officials, many also believed Islamabad will look towards faster GDP growth in the coming fiscal year.

On Thursday, the government unveiled the Pakistan Economic Survey (PES) for FY2025-26, according to which GDP growth was recorded at 3.7% in the outgoing fiscal year.

The growth was higher than the previous year’s figure of 3.18% but well short of its target of 4.2% announced in last year’s budget.

“The improvement owes to effective macroeconomic management, better fiscal account, growth in the large-scale manufacturing (LSM) sector, resilience of the agriculture sector to floods of 2025, exchange rate stability and reforms under the IMF Extended Fund Facility (EFF) Programme,” the survey stated.

Asked about an International Monetary Fund (IMF) agreement on budgetary targets, the finance minister said discussions were continuing.

“We are in talks with them, and discussions are progressing positively,“ he said.

Addressing the media persons, the finance minister shed light on the country’s economic performance during FY26.

“When we entered this fiscal year, there was trade uncertainty on account of the tariff discussion. By the end of July, we reached a competitive position with respect to our exports, especially to the US,” said Aurangzeb.

The finance minister said that Pakistan saw floods after that, and then a regional conflict from March onwards. “So these three were the exogenous factors,” he added.

GDP growth

The economy accelerated its growth momentum in FY26 and recorded a growth of 3.7% compared to 3.18% last year.

The improvement owes to effective macroeconomic management, better fiscal account, growth in Large Scale Manufacturing (LSM) sector, resilience of the agriculture sector to floods of 2025, exchange rate stability and reforms under the IMF Extended Fund Facility (EFF) Programme.

The survey flagged a mixed performance across key sectors as Pakistan’s economy continued to stabilise under the International Monetary Fund (IMF) programme.

Pakistan’s per capita income rose to $1,901 in FY26, up 9% YoY. “Income recovery has resumed alongside economic growth,” read the report.

Whereas, the country’s economic size rose to PKR 126.9 trillion ($452.1 billion) in FY26. This is the largest-ever economic size recorded in Pakistan’s history, according to the survey.

Meanwhile, the exchange rate remained stable at 280.65 Rs/USD compared to 279.35 Rs/USD in FY25.

Agriculture

Provisional data showed agriculture expanded 2.9% YoY in FY26. “This is notwithstanding the floods,” Aurangzeb said.

Government initiatives and timely support measures helped the crop sub-sector demonstrate resilience in the wake of the 2025 floods, enabling it to perform better than expected.

The livestock sector expanded by 3.75% in FY26, compared with 2.95% in 2024-25.

Industry & Services

Industrial output rose 3.5% in the outgoing fiscal, driven by manufacturing and construction, while services growth came in at 4.1% in FY26, the highest in four years.

The service sector has remained a strong growth anchor for Pakistan’s economy, as it makes up nearly 58% of the GDP, said Aurangzeb.

LSM

Pakistan’s large-scale manufacturing sector (LSM) grew by 6.1% in FY26, which is broad-based growth, said Aurangzeb.

The growth was supported by improved domestic demand, easing input constraints, and better supply conditions, read the report.

“Out of 22 sectors of manufacturing, we have observed growth in 16 sectors, including food, textiles, wearing apparel, etc.,” he said.

Pakistan’s fiscal deficit stood at 0.7% of the GDP in FY26 (Jul-Mar), compared to 2.6% last year. Whereas the primary surplus stood at 3.2% of the GDP in FY26.

“Fiscal discipline is translating into stronger economic fundamentals,” read the report.

Pakistan’s current account deficit was at $252 million in the July-April FY26. Whereas, the country’s trade deficit from July-March FY26 stood at $23.53 billion, showed the survey.

On the external front, the finance minister said that Pakistan needs to increase both its exports and remittance inflows.

Pakistan’s remittance inflows clocked in at $33.9 billion in FY26 (Jul-Apr), up 9% YoY.

“Remittances are part of the structural economies of our regional countries.  They are and will remain a very important component of our external balancing position as we move forward,” he said, while lauding the role of Overseas Pakistanis.

Aurangzeb shared that the government expects to achieve remittances to the tune of $41-42 billion by the end of this fiscal year.

Trade Indicators

Talking about trade indicators, Aurangzeb admitted that Pakistan’s exports have declined, citing two major factors.

“Our rice exports have declined from $1.1 billion, while sugar exports, a one-off event, reduced by $400 million. Therefore, our food sector exports reduced by $1.5 billion,” he said.

Whereas Pakistan’s textile exports have improved during the outgoing fiscal year, he said.

Pakistan’s goods exports during July-March FY 2026 stood at $22.7 billion, compared with $24.7 billion in the same period last year.

“People and the industry have to review their business model and their productivity discussion,” said Aurangzeb.

Made-in-Pakistan football goes to FIFA World Cup

Aurangzeb also highlighted the increase in the export of sports goods, which stood at $319 million during July-March FY26, mentioning that the football that was to be used during the upcoming FIFA World Cup was manufactured in Pakistan.

Regarding the IT sector, he said that Pakistan’s IT exports have crossed $3.8 billion in FY26 (Jul-Apr), and are expected to cross $4.5 billion by the end of this fiscal year.

As per the report, freelancers’ annual income rose from $642 million in FY25 to $959 million in FY26.

Meanwhile, during July-March FY26, imports increased by 6.9% percent to $50.7 billion, compared with $47.4 billion in the same period last year.

As per the report, the increase was mainly driven by higher imports under the transport, food, and machinery groups, reflecting stronger demand for vehicles and transport equipment, essential food items, and capital goods.

“We thought that our import bill would go down. However, because of the increase in petroleum prices, it could hit $70 billion this fiscal,” said Aurangzeb.

He said that despite the increase in imports, the country’s current account would remain manageable.

Pakistan’s forex reserves stand at $17.2 billion as of 29 May 2026, up 49% YoY.

“We are hopeful to touch $18 billion by the end of June, which will take us to 3-months of import cover, which is an internationally recognised standard,” said Aurangzeb.

Stock Performance

Talking about the stock sector performance, the finance minister noted that 11 IPOs were listed at the PSX in FY26. This is the highest in two decades, which reflects strong corporate confidence in future growth prospects, he said.

According to the Economic Survey, Pakistan’s capital markets performed well compared to major global stock markets in FY26. The KSE-100 index demonstrated a growth of 18.4% during July-March FY 2026.

“This increase can be attributed to strong corporate earnings, a decline in both the policy rate and inflation, the successful review of the IMF-EFF Programme, and subsequent tranche disbursements, all of which contributed to a stable macroeconomic environment that bolstered investor confidence,” read the report.

Debt

As per the report, Pakistan’s debt-to-GDP stood at 68.5% in FY26. “Debt sustainability is improving as the debt burden on the economy continues to decline,” it added.

External public debt was recorded at $92.2 billion at end-March 2026, showing an increase of around US $364 million during the first nine months of the current fiscal year compared to an increase of $883 million during the same period of the last fiscal year, read the document.

“Government external debt accounts for the majority, amounting to $82,261 million, while outstanding debt from the IMF stands at US $ 9,891 million.

“The IMF debt further consists of the federal government debt ($3,620 million) and the central bank debt ($6,271 million),” read the report.

The Paris Club debt amounts to $5.5 billon, representing approximately 6% of Pakistan’s total external public debt. These loans are also concessional, offering longer repayment periods and lower interest rates.

Bilateral loans from non-Paris Club countries amount to $19.03 billion i.e. 21% of total external debt.

Inflation

The inflation rate rose from 7.3% in March 2026 to 10.9% in April 2026 due to a rise in global oil prices and supply disruptions amid the Middle East crisis.

Average inflation for July-May FY26 was recorded at 6.7%. “Price stability broadly preserved despite Israel-Iran conflict and its impact on energy prices,” read the report.

Privatisation Continues

On privatisation, the finance minister shared that three electricity distribution companies (DISCOs) would be privatised by the end of the outgoing fiscal year.

Pakistan’s investment-to-GDP ratio remained stable at 14.38% in FY26, mainly supported by growth in private sector capital formation. National savings were recorded at 14.13% percent of GDP, indicating limited reliance on external financing.

During July-March FY26, tax revenue increased by 11.3% to Rs10,166.6 billion while non-tax revenue grew by 9.5% to Rs4,632.7 billion.

The country’s volume of investment through Roshan Digital Accounts (RDA) has reached $12.7 billion in FY26, it shared.

Middle East Conflict

Talking about the ongoing conflict in the Middle East, the finance minister said that the government has successfully negotiated the first-order impact of the conflict, but its impact would be felt in the coming months.

“Our oil imports, which shot up above $1 billion in April, were lowered to half a billion dollars in May, because we are now trying to manage the inflows,” he said.

“Whereas, the second-order impact of this conflict is being observed in the rising inflation rate, which has led to an increase in the policy rate,” he said.

Aurangzeb added that he remains optimistic that the country’s leadership mediating efforts would be successful. “But the reality is that the energy infrastructure has been hit and continues to be hit. We are taking that into vis-à-vis our contingency,” he added.

Economic Survey 2024-25: Pakistan misses growth target

According to the report, the ongoing conflict in the Middle East has become a significant external risk to both the global economy and emerging economies.

Disruptions in energy supply routes and damage to critical production facilities increased uncertainty in global energy markets and added downside risks to growth.

At the same time, renewed trade tensions, elevated public debt, and concerns regarding slowing productivity growth continued to weigh on the global economic outlook.

According to the World Economic Outlook (April 2026), global growth is projected to moderate to 3.1% in 2026, while global headline inflation is expected to rise to 4.4% from 4.1% in 2025.

The Economic Survey provides a comprehensive overview of the country’s economic performance during the outgoing fiscal year and serves as a key policy document ahead of the annual budget.

The government had earlier indicated that the budget would be presented on June 10, but later revised it to June 12.

The upcoming budget is expected to outline the government’s fiscal priorities, revenue measures and expenditure plans for FY27 amid ongoing efforts to stabilise the economy and sustain growth.

NEC targets

The National Economic Council (NEC) on Wednesday approved a Rs3.669 trillion national development outlay for the fiscal year 2026-27, including Rs838 billion in foreign aid and set a GDP growth target of 4%.

The meeting also sanctioned Rs1 trillion for the federal Public Sector Development Programme (PSDP), Rs2.218 trillion for provincial development programmes, and Rs451 billion for state-owned enterprises (SOEs).

The NEC unanimously approved a four-point agenda and revised economic indicators for the outgoing fiscal year 2025-26, allocating Rs820 billion for the federal PSDP, Rs2,938 billion for provincial development programmes, and Rs355 billion for SOEs.

The council approved a GDP growth target of 3.7% for 2025-26.

Addressing the National Economic Council (NEC) meeting, after several delays, the PM stressed that the next phase requires urgent action on jobs, production, and exports.

Pakistan has achieved macroeconomic stability, “but there is a need to inject growth, improve employment opportunities and production, increase exports, and accelerate economic activity,” he said.

PM noted that despite the ongoing geopolitical crisis, which led to a significant increase in energy prices, Pakistan has managed to comply with IMF conditions.

The prime minister added that the federal government has been consulting with the provinces on the upcoming budget for several weeks.

“Without federal and provincial integration and support, we would not have reached this point. Now we have to move forward quickly,” he said.

“Our biggest challenge at present is to strengthen our defences and curb terrorism,” he said, expressing optimism that terrorism would soon be eliminated.

He emphasised that to achieve growth and accelerate the country’s GDP, “it is essential to introduce incentives that drive export growth, revive manufacturing, and transform the economy”.

PM Shehbaz also informed the council that he had a detailed discussion with IMF Managing Director Kristalina Georgieva on Tuesday. “She was extremely appreciative of Pakistan’s sincere efforts,” he said.

The NEC is Pakistan’s highest constitutional forum for economic planning and coordination between the federal and provincial governments.

Chief Ministers of all provinces participated in the meeting.

The NEC meeting, originally scheduled for May 22, was postponed and rescheduled for June 3. However, it was postponed again and rescheduled for June 8, 2026.

Earlier, Business Recorder reported that the government is likely to postpone the presentation of the 2026–27 federal budget from June 10 to June 12, with a final decision on the proposed change expected in a day or two.

In a post on the social media platform X, the minister shared that summaries for convening budget sessions in the National Assembly and the Senate on June 10 had been sent.

Meanwhile, according to media reports, the National Economic Council (NEC), chaired by Prime Minister Shehbaz Sharif, is scheduled to meet tomorrow (Wednesday) after several delays.

The NEC is Pakistan’s highest constitutional forum for economic planning and coordination between the federal and provincial governments.

The federal government has yet to secure the consensus of provincial governments on a proposal to retain around Rs1.1 trillion to Rs1.2 trillion from the provinces’ shares under the National Finance Commission (NFC) Award for strategic spending and federal development projects, creating uncertainty over the Federal Budget 2026-27.

This was stated by Khyber Pakhtunkhwa Finance Adviser Muzammil Aslam while speaking to the media here on Monday. He further said that the budget process remains incomplete as key fiscal figures have yet to be finalised with the International Monetary Fund (IMF).

Earlier, the government was expected to announce its federal budget for fiscal year 2026-27 on June 5, as it targets a gross domestic product (GDP) growth of 4%. However, the presentation was delayed to June 10.

On Tuesday, Business Recorder reported that the government is likely to postpone the presentation of the 2026–27 federal budget from June 10 to June 12, with a final decision on the proposed change expected in a day or two.

Speaking to the media at Parliament House on Monday, Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal said that several key budget-related matters are yet to be finalised, prompting discussions on revising the budget presentation schedule.

He said discussions were still underway and that limited time, coupled with the approaching month of Muharram, had complicated the process.

“Many aspects of the budget are still being finalised,” he said, adding that no final decision had yet been taken on whether the presentation date would be changed.

The budget comes as Pakistan navigates strict IMF-mandated fiscal curbs and seeks economic stabilisation.

According to a statement, PM Shehbaz welcomed the delegation, terming the industrialists as “Pakistan’s ambassadors and identity”.

The prime minister expressed gratitude to the business community for standing with the government during difficult economic conditions.

“Strong partnership between the government and the private sector is the guarantee of economic progress”, he said, adding that consultation with the business community is of utmost importance in policy-making regarding Pakistan’s economy

“We are moving on the path of export-led growth; this is the central focus of our economic policy.”

The delegation included Mian Muhammad Mansha, Arif Habib, Atif Bajwa, Muhammad Ali Tabba, Musadaq Zulqarnain, Ziad Bashir, Shahzad Salim, Dr Zeelaf Munir, Omar Saeed, Umer Mansha, Yusuf Saeed, Kamran Arshad, Khurram Mukhtar, Asif Peer, Sultan Gohar Ijaz, Fawad Anwar, Zulfiqar Hayat, Javed Iqbal, Yusuf Hussain, Amir Ibrahim, Khawaja Masood Akhtar, and Ijaz Nabi.

PM shared that steps are being taken to bring the informal economy into the tax net. Whereas, measures are being included in the budget to provide relief to the public

“We are focusing on the promotion of industries that increase domestic production, boost exports, and create maximum employment opportunities he said, adding that growth in industry, agriculture, and information technology sectors will further stabilise the economy and create new employment opportunities.

During the meeting, the delegation was briefed on the government’s measures for business, industry, and trade promotion.

It was said that reforms have been carried out in tax tribunals for the early disposal of tax cases. It was shared that recruitments in these tribunals have been made through a highly transparent process.

It was informed that a committee has been constituted regarding the establishment of Special Commercial Courts.

During the meeting, the business delegation appreciated Pakistan’s diplomatic efforts for the restoration of peace in the region and commended the prime minister and his team, read the statement.

The business leaders appreciated the government’s vision for promoting digital payments and a documented economy.

The delegation welcomed the government’s initiatives regarding tax reforms and ease of doing business.

They also lauded the government for reducing electricity rates for industries, abolishing the Export Development Levy, and ensuring timely payment of tax refunds.

The participants appreciated the government’s decision to take the business community into confidence in the preparation of the upcoming budget.

The business leaders presented their suggestions regarding the strengthening of the national economy and the budget.

The delegation expressed its firm resolve to continue full cooperation with the government for economic recovery and development, read the statement.

The members appreciated the government’s commitment to industrial development, increasing exports, and creating new employment opportunities.

The meeting was attended by Federal Minister for National Food Security & Research Rana Tanveer Hussain, Federal Minister for Law & Justice Azam Nazeer Tarar, Federal Minister for Climate Change Musadik Malik, Federal Minister for Economic Affairs Ahad Khan Cheema, Federal Minister for Information & Broadcasting Attaullah Tarar, Federal Minister for Information Technology & Telecommunication Shaza Fatima, Minister for Petroleum Ali Pervez Malik, Federal Minister for Power Division Sardar Awais Ahmad Leghari and Governor State Bank of Pakistan (SBP) Jameel Ahmad.

The budget might be presented on June 10, the source and Geo News TV said.

The government source sought anonymity because he was not authorised to disclose the information.

Stability without growth: IMF programmes and policy challenges for Pakistan

The June 5 parliamentary session will proceed as scheduled, providing a platform for both the government and the opposition to debate the budget, the source said.

The government has not given any reason yet for the delay.

The source said there were still issues to be settled with the IMF on creating fiscal space, especially some funds to be relinquished by the provinces for federal spending.

Pakistan’s finance ministry did not immediately respond to a request for a comment.

The country is on a $7 billion IMF bailout program, which has helped the economy stabilise and recover.

Senior Pakistan Muslim League-Nawaz (PML-N) leader and Member of the National Assembly (MNA), Tahira Aurangzeb, confirmed to Business Recorder that the federal budget, which was earlier scheduled to be announced on June 5 (Friday), would now be presented on June 10 (Wednesday).

She also disclosed that the National Assembly session convened for the budget presentation had been postponed accordingly.

When asked about the reasons behind the delay, the parliamentarian declined to elaborate on the factors prompting the rescheduling.

Earlier, the National Economic Council (NEC), chaired by Prime Minister Shehbaz Sharif, postponed its crucial meeting, scheduled to be held tomorrow, to facilitate further deliberations on the upcoming budget.

“It is to inform that the meeting of the National Economic Council (NEC) scheduled on Wednesday, 3rd June, 2026, has been postponed. New date will be communicated in due time,” read the notice by the Cabinet Division.

The postponement of the NEC meeting is particularly significant as the constitutional body is required to approve key macroeconomic targets and endorse the size of the Public Sector Development Programme (PSDP) before the federal budget is formally unveiled.

Sources familiar with the matter told Business Recorder that one of the key sticking points remained the size and composition of the PSDP, with multiple stakeholders within the coalition government pressing for higher allocations for development schemes despite fiscal constraints.

On Monday, Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal said that the Ministry of Finance allocated Rs1.126 trillion for the PSDP 2026–27 against total development requirements of Rs4.097 trillion, resulting in a funding gap of nearly Rs3 trillion.

Meanwhile, another factor contributing to the delay is the government’s continuing engagement with the IMF over the fiscal framework underpinning the upcoming budget, said sources.

Pakistan is currently navigating negotiations related to revenue targets, expenditure rationalisation and fiscal consolidation measures, making IMF consultations central to the finalisation of the budget architecture.

Sources said authorities wanted to ensure broad alignment with IMF expectations before locking in spending commitments and announcing taxation measures.

“The government wants to avoid last-minute changes after the budget announcement. Taking the IMF on board on key numbers is being treated as essential,” a source involved in the discussions said.

The budget comes as Pakistan navigates strict IMF-mandated fiscal curbs and seeks economic stabilisation. The country is aiming for 4% GDP growth in the next fiscal year, a slightly faster pace than last year, even as the crude price shock from the Middle East war looms.

Pakistan expects inflation to average 8.2% next year.

“It is to inform that the meeting of the National Economic Council (NEC) scheduled on Wednesday, 3rd June, 2026, has been postponed. New date will be communicated in due time,” read the notice by the Cabinet Division.

The NEC is Pakistan’s highest constitutional forum for economic planning and coordination between the federal and provincial governments.

The government is expected to announce its federal budget for fiscal year 2026-27 on June 5, 2026 (Friday), as it targets a gross domestic product (GDP) growth of 4%.

However, the postponement of the NEC meeting suggests that the budget might get delayed. Local media reports suggested that it will be announced on June 8 or 10.

The budget comes as Pakistan navigates strict IMF-mandated fiscal curbs and seeks economic stabilisation.

 “Against a total demand of Rs4.097 trillion from different ministries, the Ministry of Finance has allocated only Rs1.126 trillion. This means there is an unmet demand of nearly Rs3 trillion,” he said.

Projects worth Rs3 trillion would be rejected or unapproved, he said.  “We will have to selectively allocate only Rs1.126 trillion out of demands exceeding Rs4 trillion. This is a very unpleasant task,” Iqbal said.

The minister made these remarks during the Annual Plan Coordination Committee meeting in Islamabad, which met today to finalise recommendations for the federal development budget and annual economic plan for the fiscal year 2026-27, with the agenda for the session already prepared, sources said.

According to sources, the meeting will consider proposals for the next fiscal year’s development budget while also reviewing the performance and utilisation of the development budget during the current fiscal year.

Development allocations for all federal ministries and divisions will come under detailed examination.

During the presser, Iqbal said that the Ministry of Planning is constrained by the funding envelope provided by the Ministry of Finance, and we must remain within that limit.  “This is one of the biggest dilemmas facing the Ministry of Planning: we are being forced to make allocations within shrinking development budgets.”

On PSDP, the total allocation is Rs1.126 trillion. Out of this, Rs125 billion has been earmarked for the N-25 highway project.

“If you deduct this amount from the total PSDP, only Rs1.001 trillion remains. This is the same number as the PSDP in 2018,” he shared.

Iqbal added that projects worth approximately Rs87 billion were demanded by coalition partners last year. In addition, around Rs100 billion has been earmarked for projects in Balochistan apart from N-25.

Furthermore, Rs153 billion has been allocated for Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and the merged districts.

“Ideally, these funds should come through the NFC mechanism. However, since no consensus has yet been reached on this issue, both their current and development budget allocations of GB and AJK continue to come from the federal government’s share,” he said.

He shared that another Rs70 billion has been earmarked for achieving the Sustainable Development Goals (SDGs).

After accounting for all these commitments, only about Rs591 billion remains available, he said.

In addition, we must provide rupee cover for foreign-funded projects, meaning the local currency funding required for loans obtained from institutions such as the Asian Development Bank, the World Bank, and other multilateral lenders.

“The initial demand for rupee cover amounted to Rs832 billion, but after rationalisation by the Economic Affairs Division (EAD) in consultation with ministries, the figure was reduced to Rs426 billion,” he said.

If we account for this Rs426 billion requirement, only Rs165 billion remains in the entire PSDP. “If we further deduct the Rs180 billion carry-forward impact of last year’s cuts, the PSDP effectively moves into a negative balance of Rs15 billion,” he said.

“Practically speaking, this is the situation in which we are operating. There is not much development, and this is not a happy state for any nation,” said Iqbal.

“The first reality we must acknowledge is that there is virtually no fiscal space available for a new project,” he added.

The NA session will be held at 5pm on Friday, while the Senate session will be held at 6pm on June 5.

The session has been convened under Article 54(1) of the Constitution.

Last week, the National Assembly Standing Committee on Finance and Revenue directed the Tax Policy Unit of the Ministry of Finance and the Federal Board of Revenue (FBR) that the federal budget (2026–27) must move beyond short-term stabilisation measures and instead serve as a platform for sustainable economic reform, fiscal transparency, improved governance and inclusive growth.

The Standing Committee on Finance and Revenue expressed serious concern about the continued reliance on indirect taxation and petroleum levies instead of sustainable tax-base expansion.

During the briefing, the Committee was informed that Pakistan remains on a “fragile stabilisation path” despite signs of gradual economic recovery.

GDP growth for FY2026–27 is projected between 3.5% and 4.5%, while inflation has once again entered double digits, reaching 10.9% year-on-year in April 2026.

Earlier, the Ministry of Finance dismissed reports that Prime Minister Shehbaz Sharif handed the budget-making process to Deputy Prime Minister Ishaq Dar, calling the claims “factually incorrect” and “misleading”.

The ministry said that the story, published in a local media outlet, “incorrectly portrays the constitution of a high-level review committee by the Prime Minister as a ‘handover’ of the budget-making process from the Finance Division or as a ‘sidelining’ of the finance minister”.

“This interpretation is factually incorrect, misleading and does not reflect the actual mandate or functioning of the committee,” it said.

The brokerage house, in its report titled Federal Budget FY27 Preview: Walking the recovery path upholding fiscal discipline, said that the proposed target comes at a time when the Federal Board of Revenue is facing a tax shortfall of around Rs683 billion during the first 10 months of FY26, highlighting the government’s continued reliance on aggressive revenue mobilisation measures to meet commitments agreed with the International Monetary Fund.

“Consequently, the government is likely to introduce ~Rs430 billion in additional revenue measures each at both the federal & the provincial levels. Wherein, a major portion is expected to come from collections through stricter enforcement and administrative measures,” read the report.

The report noted that authorities are considering generating nearly Rs780 billion through enforcement-related collections, potentially allowing the government to avoid imposing major new taxes in the upcoming budget.

“However, we believe this proposal to be less likely to go ahead completely with the IMF,” said Taurus Securities.

The government is also expected to set a fiscal deficit target of 3.5% of GDP and a primary surplus target of 2% of GDP for FY27.

As per the report, the upcoming budget is also expected to provide some relief to the salaried class and the corporate sector.

“However, the government has committed to the IMF to adopt a ‘net-zero effect on revenue’ approach to offering any reliefs. This means that the loss in tax collections due to the reliefs would be compensated by reciprocating additional taxation measures elsewhere and stricter enforcement.”

Proposals under consideration include reducing tax rates across salary slabs, exempting annual income up to Rs1 million from tax, and abolishing the 10% surcharge on high-income earners.

In addition, the government is considering a phased reduction in the super tax and gradually lowering the corporate tax rate to 22% over the long term. Other relief proposals include the withdrawal of capital value tax and advance tax on exporters, although authorities are reportedly not in favour of removing taxes on inter-corporate dividends.

On the revenue side, non-tax income is expected to remain heavily supported by profits from the State Bank of Pakistan and petroleum levy collections. SBP profits exceeded Rs2.4 trillion in FY26, while petroleum levy collections crossed Rs1.2 trillion during the first nine months of the current fiscal year.

“We expect the trend to continue in FY27 also. However, with a lower average policy rate for FY27, the quantum of profit might be lower,” it said.

The report estimates that petroleum levy collections could exceed Rs1.7 trillion next year, with average levy rates on petroleum products remaining elevated to offset revenue pressures. The carbon levy on petrol and diesel is also expected to rise to Rs5 per litre in FY27.

Meanwhile, the federal Public Sector Development Programme (PSDP) allocation for FY27 is likely to be set at Rs1.126 trillion, significantly lower than the Rs2.9 trillion demand put forward by the Ministry of Planning due to fiscal constraints.

Among other key proposals under consideration are a fixed tax scheme for retailers, expansion of the Third Schedule of the Sales Tax Act to include additional FMCG items, and stricter implementation of digital invoicing systems. Provinces may also be required to generate an additional Rs430 billion through enhanced sales tax enforcement and higher agricultural income taxes.

The report further indicated that stricter measures against non-filers, including enhanced access to banking data and restrictions on property and vehicle purchases, are also under consideration as part of efforts to broaden the tax base.

According to informed sources, policymakers are evaluating a proposal to slash the current cumulative duty and tax structure on fiber optic cable imports from nearly 60% to around 5% in a bid to encourage telecom operators and internet service providers to rapidly expand Fiber-to-the-Site (FTTS) infrastructure nationwide.

At the same time, the government is also reviewing options to reduce taxes on internet services to make broadband more affordable for consumers under the broader “Digital Pakistan” vision. Currently, internet users pay approximately 19.5% in provincial taxes in addition to a 12.5% federal withholding tax, significantly increasing end-user costs.

Industry stakeholders have repeatedly argued that the existing tax regime on telecom infrastructure and internet services has slowed broadband expansion and limited digital inclusion, particularly in underserved areas.

Sources said the proposed reduction in fiber optic duties is aimed at lowering infrastructure deployment costs and accelerating fiberisation, which is considered critical for the successful rollout of next-generation 5G services in Pakistan.

Telecom experts maintain that without large-scale fiber network expansion, the country may struggle to fully realise the commercial and technological potential of 5G connectivity.

Officials familiar with the ongoing budget consultations said easing the tax burden on digital services is being considered to stimulate internet adoption, support the growth of Pakistan’s IT and freelancing sectors, and improve access to affordable high-speed internet.

“The government recognises that affordable broadband and strong digital infrastructure are essential for economic growth and future competitiveness,” a senior official familiar with the discussions said, adding that final decisions would be made during the FY2026-27 budget deliberations.

Telecom industry representatives have welcomed the possible measures, saying lower import duties and reduced internet taxation could attract fresh investment in broadband infrastructure, improve service quality, and expand connectivity across the country.

The upcoming federal budget is expected to place increased focus on digital infrastructure development as Pakistan moves toward future spectrum auctions and eventual commercial 5G deployment.

Upon discussing the matter with Wireless and Internet Service Providers Association of Pakistan (WISPAP) Chairman Shahzad Arshad, he described the reported developments as a highly encouraging and progressive step for the telecom and internet industry of Pakistan.

He stated that if the government proceeds with reducing import duties on fiber optic cable and lowering taxation on internet services, it would significantly accelerate broadband expansion, improve affordability for end users, and strengthen the foundation for 5G and future digital infrastructure.

He further added that such policy decisions would represent a major leap forward towards achieving the goals of the Digital Pakistan initiative by enabling wider access to reliable, high-speed internet connectivity across urban and rural communities alike.

“The Ministry of Finance strongly rejects the misleading and speculative impression created by the Express Tribune story titled ‘PM hands budget-making to Dar’, published on May 14, 2026,” read the clarification.  

The ministry said that the story “incorrectly portrays the constitution of a high-level review committee by the Prime Minister as a ‘handover’ of the budget-making process from the Finance Division or as a ‘sidelining’ of the finance minister”.

“This interpretation is factually incorrect, misleading and does not reflect the actual mandate or functioning of the committee,” it said.

The ministry informed that the committee constituted has been tasked with reviewing and analysing certain tax policy proposals prepared by the Tax Policy Office in the context of the upcoming budget.

“Such consultative and inter-ministerial review mechanisms are neither unusual nor extraordinary, “ it said.

The ministry was of the view that the prime minister, as head of the government, “is fully within his constitutional and administrative authority to seek broader input from relevant cabinet members before finalisation of tax proposals that may impact businesses, inflation, investment climate and the wider economy”.

It reiterated that “at no stage has the budget-making process been shifted away from the Ministry of Finance or the Finance Division”.

It added that the preparation of the federal budget continues to be undertaken by the Ministry of Finance under the leadership of Finance Minister Muhammad Aurangzeb.

The ministry said that Aurangzeb is also a member of the committee constituted by the prime minister and continues to lead Pakistan’s engagement with the International Monetary Fund (IMF) and other international financial institutions on all budgetary and macroeconomic matters.

“Similarly, the committee relating to enforcement measures has been formed only to refine and strengthen revenue administration and enforcement proposals in consultation with relevant stakeholders.

“Such coordination mechanisms are a normal feature of governance and fiscal management,” it added.

The ministry said that the federal budget remains a collective constitutional and cabinet-driven exercise with the Ministry of Finance playing its central and mandated institutional role.

“The ministry expects responsible sections of the media to avoid speculative interpretations and to report institutional processes with accuracy, context and due professional responsibility,” it concluded.

Finance Minister Muhammad Aurangzeb, today briefed the visiting IMF Mission on Pakistan’s macroeconomic outlook, fiscal strategy, reform priorities, and the government’s ongoing efforts to ensure sustainable economic stability and long-term growth, read a statement on Wednesday.

“The discussions focused on Pakistan’s macroeconomic stabilisation efforts, preparations for the upcoming federal budget, and the broader reform agenda aimed at strengthening fiscal and external sustainability while fostering sustainable economic growth.

“Both sides exchanged views on maintaining reform momentum, preserving macroeconomic stability, and advancing structural reforms to promote investment, productivity, and export-led growth within a balanced and forward-looking policy framework.”

Welcoming the IMF delegation to Islamabad, the Aurangzeb appreciated the Fund’s continued engagement and constructive dialogue with the Government of Pakistan.

Aurangzeb shared encouraging developments regarding Pakistan’s external sector, highlighting positive trends in remittances and export performance.

He noted that recent data indicated improvement in exports on both month-on-month and year-on-year basis, reflecting growing resilience in the economy and a gradual strengthening of macroeconomic fundamentals.

The finance minister emphasised that while economic stabilisation efforts had produced encouraging results, the government remained fully mindful of the structural challenges confronting the economy, particularly external liabilities and the need to accelerate sustainable, export-led growth.

He reiterated the government’s commitment to deepening reforms aimed at strengthening macroeconomic stability without compromising long-term growth prospects.

In this regard, he underscored the importance of moving Pakistan away from recurring boom-and-bust cycles through structural reforms, productivity enhancement, deregulation, and improved export competitiveness.

Aurangzeb further stated that the government’s reform agenda had been carefully calibrated in consultation with international experts and economists. He emphasised that the ongoing policy measures were not driven by short-term considerations, but formed part of a broader and technically grounded economic transformation strategy endorsed at the highest level.

He also briefed the Mission on Pakistan’s continued engagement with international development partners, including ongoing economic cooperation initiatives with China and efforts aimed at mobilising long-term investment aligned with the country’s strategic economic priorities.

The visiting IMF Mission, led by Mission Chief Iva Petrova, acknowledged the positive progress made by Pakistan in maintaining macroeconomic stability despite a challenging global and regional environment.

The Mission appreciated the government’s continued commitment to prudent economic management and reform implementation.

The IMF team emphasised the importance of sustaining reform momentum, maintaining fiscal discipline, and advancing structural reforms to support durable and inclusive economic growth. Discussions during the meeting also focused on the broader macroeconomic framework, the Government’s reform agenda, and priorities for the upcoming budget.

The Mission reaffirmed its commitment to continued engagement and constructive cooperation with the government in support of the country’s economic reform programme and long-term economic resilience.

The meeting was attended by Governor State Bank of Pakistan Jameel Ahmad, Secretary Finance Division Imdad Ullah Bosal, Chairman Federal Board of Revenue Rashid Mahmood Langrial, and senior officials of the Finance and Revenue Division, as well as the Tax Policy Office.

Earlier in the day, the SBP announced it had received about $1.3 billion from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).

“The amount would be reflected in SBP’s foreign exchange reserves for the week ending on May 15, 2026,” the SBP said.

Pakistan’s 37-month EFF arrangement was approved on September 25, 2024, and aims to build resilience and enable sustainable growth.

Meanwhile, sources earlier told Business Recorder that the government is unlikely to introduce any new taxes in the upcoming budget, as it plans to achieve next year’s revenue target through enforcement and administrative measures estimated at Rs778-780 billion.

Sources said that the federal budget for the next fiscal year is expected to provide relief to taxpayers, with the authorities relying on alternative revenue-generation measures to offset potential revenue losses.

The delegation presented a comprehensive set of proposals and recommendations for the Federal Budget 2026–27 aimed at strengthening the competitiveness, sustainability and long-term growth of the country’s textile sector and export industry, read an official statement.

During the meeting, the delegation emphasised the importance of maintaining a stable, growth-oriented and internationally competitive policy environment to enable the industry to effectively respond to evolving global market dynamics and increasing regional competition.

The delegation shared a broad range of policy recommendations focusing on taxation reforms, energy affordability, export facilitation, industrial modernisation, liquidity management, investment promotion and ease of doing business.

The proposals were aimed at reducing the cost of production, improving industrial efficiency, enhancing exporters’ liquidity position, encouraging technological upgradation and creating a more predictable and investor-friendly business environment.

The industry representatives stressed that timely policy support and structural reforms would help strengthen Pakistan’s export competitiveness, promote value-added manufacturing, attract fresh domestic and foreign investment and facilitate greater integration into international supply chains.

They noted that improving the operating environment for exporters would support industrial expansion, employment generation and economic growth while also contributing positively towards fiscal stability and foreign exchange inflows.

The delegation also emphasised the importance of addressing long-standing operational and structural challenges affecting industrial productivity and export performance, including the need for efficient refund mechanisms, rationalised energy pricing structures, facilitation for exporters and measures aimed at reducing the compliance burden on businesses.

It was highlighted that such reforms could significantly improve cash flow management, enhance investor confidence and enable industries to allocate greater resources towards expansion, modernisation, and workforce development.

The proposals further underscored the importance of a policy framework that supports innovation, encourages value addition, facilitates small and medium enterprises and promotes industrial diversification in line with changing global demand patterns.

The delegation noted that strengthening the competitiveness of Pakistan’s textile sector would have positive multiplier effects across the wider economy through increased exports, higher industrial output, enhanced job creation and stronger economic resilience.

Aurangzeb appreciated the engagement and reaffirmed the government’s commitment to maintaining regular and meaningful consultations with the business community through the dedicated Tax Policy Office of the Ministry of Finance to institutionalise continuous engagement with chambers, trade bodies and associations throughout the year.

He stated that the initiative is intended to move beyond the previous practice of engaging with stakeholders only in the few months preceding the federal budget and instead ensure a sustained consultative process to support more informed, transparent and responsive economic policy-making.

The finance minister also discussed the government’s ongoing efforts to promote transparency, documentation and improved compliance through digital monitoring systems across key sectors of the economy.

He informed the delegation that digital monitoring mechanisms had already been introduced in several major sectors, including sugar, cement, beverages and tobacco, emphasising that the initiative had been implemented across the board without exception, including in sectors where business units owned by the Prime Minister’s family also operate.

He stated that the objective of the initiative is to improve transparency, enhance efficiency, promote fair competition and strengthen revenue administration through technology-driven systems.

The finance minister invited the textile sector to extend its cooperation towards the gradual implementation of similar digital monitoring mechanisms within the textile industry.

During the discussion, it was shared that certain textile sector associations and industrial units had already been engaging with FBR teams on the matter and that pilot initiatives relating to digital monitoring had also commenced in some units.

Representatives of the textile sector acknowledged the importance of transparency and documentation and agreed to continue consultations with the government and relevant authorities to explore workable solutions that take into account the unique operational structure, supply chain dynamics and complexities of the textile industry.

The meeting was attended by leading representatives of the textile sector, including Khurram Mukhtar, Javed Bilwani, Fawad Anwar, Rehman Naseem, Shahzad Asghar, Amer Abdullah, Kamran Arshad, Shahzad Saleem, Sohail Pasha and Khawaja Masood. The joint industry presentation was submitted by representatives of APTMA, PTEA, PHMA, PTC, PRGMEA, APBUMA, TMA, PDMEA, PBEA and PAKSEA as part of the textile sector’s unified recommendations for the Federal Budget 2026-27.

The development came during Finance Minister Muhammad Aurangzeb’s meeting with a delegation of the ICAP today at the Finance Division.

The delegation was led by Samiullah Siddiqui, President ICAP, and included Jehanzaib Amin, Vice President ICAP; Ahmed Raza Mir, Vice President ICAP; and Zeeshan Ijaz, Council Member ICAP and Chairman Economic Advisory Committee.

The ICAP delegation presented a range of proposals and recommendations relating to documentation, group taxation structures, export-oriented services, and harmonisation of tax treatment across sectors.

Discussions also focused on measures aimed at improving competitiveness, facilitating investment, strengthening the ease of doing business, and supporting effective revenue mobilisation alongside the broadening of the tax base.

Pakistan to issue first ‘Panda bond’ next week, finance minister says

Aurangzeb acknowledged the proposals and recommendations shared by the delegation and noted that these would be carefully reviewed as part of the ongoing budget formulation process.

He emphasised the importance of continued engagement with professional bodies and industry stakeholders to ensure that economic and taxation policies remain responsive, practical, and aligned with the country’s broader reform objectives.

The finance minister shared the government’s ongoing efforts to transform the tax administration system through reforms centred around people, processes, and technology.

He underscored the importance of institutional modernisation, process simplification, and enhanced automation to improve transparency, reduce unnecessary human intervention, and facilitate taxpayers.

In this context, he highlighted the operationalisation of the Tax Policy Office under the Finance Division as an important institutional reform aimed at strengthening policy formulation and improving coordination between tax policy and administration.

The meeting also covered the growing role of technology and digital systems in strengthening compliance, enforcement, and revenue administration.

Aurangzeb noted that AI-led production monitoring and technology-driven oversight mechanisms introduced across various sectors are helping improve documentation, strengthen compliance, and reduce leakages within the system.

He reiterated the government’s commitment to building a transparent, technology-driven, and facilitative tax system that supports economic growth, encourages documentation, and strengthens governance and institutional effectiveness.

During his meeting with the IAP, led by Chairman IAP Shoaib Javed Hussain, the minister welcomed the delegation and appreciated the engagement of the insurance industry in contributing to the budget consultation process, read an official statement.

He emphasised the need for sustained dialogue with key sectors to ensure that policy measures remain aligned with economic priorities and contribute to long-term financial stability and growth.

The delegation presented a set of proposals focusing primarily on taxation and regulatory considerations with respect to the insurance sector. Participants discussed various aspects of the existing taxation framework, including the interaction between federal and provincial levies, and their implications for the sector.

The need for consistency, coherence, and predictability in the overall tax structure was highlighted in the context of facilitating sectoral development. Discussions also covered the need to ensure clarity in the application of sector-specific laws governing insurance, particularly in relation to the broader taxation framework. The delegation underscored the importance of ensuring that existing legal and regulatory principles remain appropriately aligned with evolving policy and accounting standards.

Govt eyes insurance sector to diversify lending sources: Aurangzeb

The delegation further proposed measures aimed at promoting savings and expanding insurance penetration, including the possible restoration of tax incentives for policyholders. Facilitating long-term savings instruments and encouraging wider participation, particularly among salaried individuals, were identified as key areas for consideration.

Participants also shared views on strengthening the role of the insurance sector in financial sector development, including through improved alignment of investment frameworks and long-term financial instruments. Continued interaction with regulators and policymakers on sector-specific issues was highlighted as essential.

Aurangzeb acknowledged the proposals presented by the delegation and noted that these would be carefully reviewed in the context of the upcoming budget. He reiterated the Government’s commitment to advancing the development of the financial sector, while maintaining a balanced and sustainable approach to fiscal policy.

Aurangzeb held a separate meeting with a delegation of the Mutual Funds Association of Pakistan (MUFAP), led by Shahzad Dada, Chairman of MUFAP, to discuss matters relating to the mutual fund industry and its role in the context of the Federal Budget 2026–27.

Finance minister engages business leaders to shape budget priorities, boost growth

Welcoming the delegation, the finance minister appreciated the continued engagement of the asset management industry in supporting policy dialogue. He acknowledged the significant role of the mutual fund sector in mobilising savings, strengthening financial intermediation, and contributing to the development of Pakistan’s capital markets.

As per a statement, the discussion focused on the broader savings landscape and the need to further enhance the efficiency and depth of financial instruments available to investors. Participants highlighted the need to reinforce institutional mechanisms that facilitate savings mobilisation, while ensuring that policy measures remain aligned with long-term financial sector objectives.

The meeting covered matters relating to the mutual fund industry, including views on the budget framework and the need for regulatory improvements to support sector growth. Participants highlighted the importance of facilitating the creation of alternative fund vehicles to broaden investment avenues within the asset management space.

The need to enhance retail participation in mutual funds was emphasised as a key priority to deepen the savings base and expand financial inclusion. The importance of fostering greater participation by non-bank financial institutions was also highlighted in the context of strengthening the mutual fund industry and overall market development.

Participants also shared views on National Savings Schemes (NSS), emphasising the need to align these instruments with broader market dynamics to avoid distortions and ensure a level playing field across savings products. A gradual and well-coordinated approach in this regard was considered important.

Aurangzeb acknowledged the perspectives shared by the delegation and noted that their proposals would be carefully reviewed in the context of the ongoing budget formulation process.

He emphasised the government’s focus on creating a balanced and enabling environment that supports the growth of the asset management industry while maintaining financial stability, and reiterated the need to further strengthen the savings ecosystem as a key pillar of sustainable economic development.

SBP Governor Jameel Ahmad announced the decision in a press conference.

Inflation in Pakistan could be above 7% in some months of the current fiscal year’s second half, he said.

The country’s gross domestic product (GDP) would grow by 3.75% to 4.75% this year, Ahmad envisaged.

What MPC says

The central bank later issued a detailed MPC statement on its decision to maintain the status quo. It said:

The committee observed that headline inflation of 5.6% y/y in December 2025 was in line with its expectation. However, core inflation has steadied around a relatively higher level of 7.4% in recent months. Meanwhile, as reflected by the recent high frequency indicators (HFIs), including large-scale manufacturing (LSM), economic activity continues to gain momentum faster than anticipated, mainly led by domestic-oriented sectors.

The committee also noted that the trade deficit has widened in the wake of a substantial increase in imports, particularly import volumes, and a decline in exports. Nonetheless, based on the resilient workers’ remittances and benign global commodity prices, the current account deficit remained relatively contained.

In this backdrop, the MPC noted that the outlooks for inflation and the current account are broadly unchanged from its previous assessment, while the outlook for economic growth has improved significantly. Based on this, the committee deemed it prudent to hold the policy rate unchanged at the current level to ensure price stability and support sustainable economic growth.

On balance, the committee projected inflation to stabilise within the target range of 5-7% in FY26 and FY27, after temporarily exceeding the upper bound for a few months during this calendar year.

“This outlook is subject to risks emanating from volatility in global commodity and domestic wheat prices, unanticipated adjustments in administrative energy prices, and a sharper than assumed pickup in domestic demand.”

At its previous meeting on December 15, 2025, the MPC had reduced the policy rate by 50 basis points (bps) to 10.5%.

Market experts had widely expected the central bank to further reduce the policy rate in today’s meeting on account of easing inflation, external stability and falling bond yields.

Arif Habib Limited (AHL) had anticipated that the SBP was likely to deliver a 75bps cut in the MPC, potentially taking the policy rate to 9.75%, “signalling a long-awaited return to single-digit territory”. However, the central bank decided to unchange the policy rate.

Similarly, Topline Securities, another brokerage house, had also expected a rate cut, citing its recent survey, which showed that 80% of the participants were expecting a rate cut.

The brokerage house had attributed the shift in market perception to lower-than-expected inflation readings in the last two months, better than expected remittance flows, supporting external accounts, and largely stable PKR/USD parity.

Similarly, a Reuters poll had found that the central bank was expected to cut its key policy rate by 50bps, as easing inflation, improving foreign exchange buffers, and a stabilising rupee bolster the case for further monetary easing despite lingering risks.

Of the 10 analysts surveyed, seven had expected the SBP to cut rates by 50bps, two saw a deeper 75bps reduction, while one expected the central bank to hold rates unchanged.

Apart from analysts, business leaders also urged the government to bring the policy rate down to single digits, citing easing inflation.

In a statement, Saqib Fayyaz Magoon, Chairman of the Businessmen Panel Progressive (BMPP) and Senior Vice President of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), had warned that persistently high borrowing and energy costs had been inflicting serious harm on industrial output and export competitiveness.

He said the government should capitalise on the improving inflation outlook to offer immediate relief to the business community by lowering the cost of financing.

Saqib stressed that the policy rate should be brought down to single digits without delay and called for a cut of at least 100bps, which he described as a long-standing demand of the business community.

The committee noted the following key developments since its last meeting:

1. First, real GDP growth was provisionally reported at 3.7% y/y for Q1-FY26, mainly led by the industry and agriculture sectors.
2. Second, both consumer and business confidence improved, whereas inflation expectations of these stakeholders eased.
3. Third, SBP’s FX reserves surpassed the end-December target, reaching $16.1 billion as of January 16, mainly led by SBP’s ongoing interbank FX purchases.
4. Fourth, FBR revenue growth decelerated to 7.3% in December, falling short of the target.
5. Lastly, the IMF has slightly upgraded its global growth forecast for 2026, while also highlighting the risks from elevated global tariff uncertainty and volatile commodity prices amidst geopolitical developments.

In view of these developments, the MPC assessed the real policy rate to be adequately positive to stabilise inflation within the target range of 5–7% over the medium term.

The committee also emphasised the need for coordinated and prudent monetary and fiscal policy mix – as well as productivity-enhancing structural reforms – to increase exports and achieve high growth on a sustainable basis.

LOTCHEM disclosed the development in its notice to the Pakistan Stock Exchange (PSX) on Friday.

“This is a public offer by PTA Global Holding Limited with Liberty Daharki Power Limited and Daewoo Pakistan Express Bus Service Limited acting in concert (PAC) to acquire up to 189,173,552 ordinary shares of Lotte Chemical Pakistan Limited comprising 12.49% of the issued ordinary share capital of target company at an offer price of Rs22.37 per ordinary share pursuant to the Securities Act, 2015 and the Listed Companies Regulations, 2017,” read the notice.

PTA Global Holding replaces AsiaPak, Montage as acquirer of Lotte Chemical Pakistan

The move follows the earlier acquisition of a 75.01% majority stake in the company by AsiaPak Investments Limited and Montage Oil DMCC through a share purchase agreement (SPA), subsequently assigned to PTA Global Holding Limited.

Back in February, AsiaPak Investments Limited and Montage Oil DMCC, together, entered into an SPA with the sponsors of LOTTE Chemical Pakistan Limited for the purchase of 1,135,860,105 ordinary shares of LOTTE Chemical at a price of Rs16.78 per ordinary share.

Following this, the Competition Commission of Pakistan (CCP) in May approved the acquisition.

AsiaPak Investments Limited is a private investment company incorporated in the British Virgin Islands, with investments in infrastructure, energy, logistics, and technology. Montage Oil DMCC, based in the UAE, is engaged in the global trade of oil and petrochemicals.

A week after the federal government announced its budget, the provincial government proposed its Rs5.335 trillion budget for the upcoming fiscal year.

Out of the total budget outlay, Rs2.706 trillion has been allocated for non-development expenditure, including pensions and salaries. “The non-development expenditure has increased by 6%,” he said.

The provincial government has budgeted Rs590 billion under current capital expenditure.

As the provincial minister presented the budget, the opposition lawmakers of Pakistan Tehrik-e-Insaf (PTI) protested.

He started the budget speech by mentioning the measures taken by the incumbent provincial government.

“I would like to congratulate the political and military leadership for safeguarding national interests during the recent tensions with India,” the minister said.

“We have completed 6,104 projects during the ongoing fiscal year,” he informed.

He shared that the government is establishing the Nawaz Sharif Institute of Cancer Treatment and Research in Lahore for Rs72 billion.

‘Record development budget’

The provincial government allocated Rs1.24 trillion for development in FY26, an increase of 47% as compared to Rs842 billion allocated in FY25.

“This budget marks a strategic shift in Punjab’s history,” said the minister. “This is the highest ever development budget in the province’s history.”

For the province of Punjab, federal transfers have been estimated at Rs4.062.2 trillion under FDP for the upcoming fiscal year. Meanwhile, the provincial government has set a target of Rs828.1 billion for its own-source revenues in FY26.

Punjab Revenue Authority (PRA) targeted to collect Rs340 billion in FY26.

Provincial surplus

The Punjab government has allocated Rs740 billion under the estimated provincial surplus (EPS) for FY26, amid an understanding reached between the federal government and the International Monetary Fund (IMF).

“It is pertinent to mention that the achievement of this provincial surplus is directly related to FBR’s revenue target,” said the minister.

The provincial government has allocated Rs494 billion for the social sector, which accounts for 40% of the development budget.

Salaries and pensions

Provincial government employees to receive a 10% salary increase. Meanwhile, the provincial government increased pensions by 5% for FY26.

Education

The provincial government has allocated Rs148 billion for education under the development package for FY26. Whereas, Rs661 billion was budgeted for the non-development expenditure of the education sector.

Laptop scheme

Under the Chief Minister’s Laptop Scheme, Rs15.1 billion has been earmarked to distribute laptops to 112,000 students in FY26.

The provincial government has budgeted Rs40 billion for the upliftment of government schools. Moreover, the Merit Scholarship Programme will receive Rs15 billion to provide educational opportunities to deserving students.

For special education, the province has allocated Rs5 billion for FY26. Moreover, Rs25 billion has been earmarked for higher education in FY26.

Health

Health budget for the province has been raised to Rs630.5 billion for FY26.

“Similar to last fiscal, the health sector remains pivotal for the provincial government,” the minister said.

The province has allocated Rs181 billion under the development budget for the health sector, an increase of 131% as compared to the last fiscal. Whereas, Rs450 billion has been earmarked under non-development expenditure for FY26.

The minister shared that the provincial government has earmarked Rs109 billion for the establishment of the Nawaz Sharif Medical District in Lahore.

He shared that Rs79.5 billion has been allocated for free medicines disbursement in government hospitals.

Budget FY2024-25: Punjab govt presents Rs5.4 trillion ‘tax-free’ budget

The Punjab government has allocated Rs411.1 billion for local bodies. Whereas, Rs150 billion and Rs20 billion will be provided as special grants for waste management and municipal corporations.

Social security package

The provincial government has proposed to allocate Rs70 billion under a social security package.

Agriculture

The provincial government has allocated Rs123 billion for the development expenditure of the agriculture, livestock and irrigation sector. Whereas, Rs56.2 billion has been budgeted for non-development expenditure.

The Punjab government has allocated Rs335.5 billion for the construction sector.

Earlier, Business Recorder, citing its sources, informed that the upcoming provincial budget will be tax-free, and no new taxes will be introduced. Estimated at over Rs1,200 billion, the new fiscal plan is expected to feature a record-breaking development outlay, emphasising health, education, infrastructure, and tourism.

As per the report, the new budget will include over 850 development schemes, and the key projects include the expansion of Nawaz Sharif Medical City in Lahore, where new hospitals will be constructed under a public-private partnership model. The government also plans to roll out extensive sanitation and clean drinking water initiatives throughout Punjab. Infrastructure development remains a central priority.

The provincial government announced its budget for the financial year 2025-26 on Friday, with Chief Minister Murad Ali Shah unveiling proposals for Rs3.45 trillion total outlay, with a deficit of Rs38.46 billion.

According to Sindh Revenue Board (SRB) website, the general rate of Sindh Sales Tax on services is 15% with the exception of telecommunication services, which are liable to be taxed at 19.5%. Tax is levied at reduced or concessionary rates in certain cases.

Sindh budget documents suggest the province is targeting to collect Rs380 billion in provincial sales tax on services in FY26.

The province is projected to collect Rs300 billion in Sindh Sales Tax on services in FY25, 35% higher compared to FY24.

“The Sindh Sales tax on services has been the mainstay of provincial revenues,” CM Murad Ali Shah said during his budget speech at the provincial assembly.

“Under the existing law, all major services are taxable and a smaller segment of services is not taxable. This situation creates disputes regarding taxability of services, which leads to unnecessary litigation and also problems for the taxpayers.

“Therefore, the decision is being made to transform to negative list regime by taxing all services but at the same time taking care that essential and social services are kept exempt that a significant part of new services is subjected to reduced rate,” he said.

On the other hand, the Sindh government has proposed to completely remove five levies including professional tax, cotton fee, entertainment duty, local cess and drainage cess, according to budget documents.

The tax relief measures would “reduce the financial burden on both individuals and businesses,” Murad Ali Shah speech text read.

Sindh govt presents Rs1.02trn Annual Development Programme for FY2025-26

“The professional tax affects salaried people and small businesses. The cotton fee adds cost to the agriculture and textile sectors.”

Besides, the yearly tax under the Motor Vehicle Ordinance for commercial vehicle is being reduced to Rs1,000, “giving relief to transport and goods carriers”.

“There is also a proposal to end the requirement for third party insurance for motorcycle.

“The mutation fee and sales certificate fees are being reduced to Rs500 from Rs1,000,” the chief minister said.

According to Sindh Revenue Board (SRB) website, the general rate of Sindh sales tax on services is 15% with the exception of telecommunication services, which are liable to be taxed at 19.5%. Tax is levied at reduced or concessionary rates in certain cases.

In a statement published on Tuesday, PRAC Chairman Mohammad Younus Dagha acknowledged the budget’s forward-thinking initiatives, including the Green Sukuk, which he said signals a positive shift toward sustainability and reflects the government’s commitment to environmental concerns.

Post-budget presser: Aurangzeb addresses key concerns

He lauded the reduction of withholding taxes on property transactions by 1.5% across all tax brackets and the removal of the 7% Federal Excise Duty on property transfers as this is expected to stimulate the real estate and construction sectors.

He also welcomed the tax relief for salaried individuals.

However, he said the lack of an increase in the minimum tax threshold may not sufficiently ease the burden on the most vulnerable and heavily taxed segments.

Moreover, he said the budget is relying on unrealistic revenue targets and growth projections, and is “disconnected from economic realities.”

He emphasized that the ambitious projections ignore prevailing macroeconomic constraints, which could lead to “unachievable expectations and exacerbate the nation’s fiscal challenges.”

Budget is ‘death knell’ for IT industry: P@SHA

He added that the budget also raised alarm over the country’s fiscal health, particularly with regard to debt servicing, which is projected to consume 50.4% of the current expenditure and 74.1% of net federal revenues in FY26.

“This severely limits the resources available for developmental spending,” it said. It said the Federal Public Sector Development Program’s reduction by 29%, from PKR 1,400 billion to PKR 1,000 billion for the upcoming fiscal year, “will undermine crucial initiatives, slow job creation, and hinder long-term economic growth.”

“By slashing development spending, the government risks undermining long-term economic progress and stability,” said Dagha.

“The reduction in PSDP funding directly contradicts the need for investment in infrastructure, education, and healthcare.”

PRAC also expressed concern over the lack of targeted support for the industrial sector, which it said has experienced a 1.5% decline during the first nine months of FY2025.

Moreover, it said despite the widening trade deficit in services, the budget has failed to announce special incentives for Pakistan’s thriving IT sector, missing an opportunity to leverage its potential for economic growth.

Similarly, no export-oriented growth measures were introduced, “a critical oversight in boosting foreign exchange earnings and strengthening the country’s economic stability.”

Meanwhile Dagha highlighted the insufficient allocation for Karachi, which now ranks as the fifth least livable city globally.

“With only PKR 3.2 billion allocated for the K-IV water supply project, a vital initiative to address the city’s ongoing water crisis, the budget allocation is deemed inadequate,” the statement said, adding that several key projects under the Karachi Transformation Plan, announced in 2020, remain largely unaddressed.

“This was a rare opportunity to implement transformative reforms in critical areas such as education, healthcare, and infrastructure,” said Dagha. “Regrettably, the budget largely missed the chance to enact meaningful reforms in these vital sectors.”

PRAC has urged the government to reconsider the budget and introduce measures that can effectively address the economic realities of Pakistan.

“There is an urgent need for a more balanced approach that focuses on sustainable growth, fiscal responsibility, and targeted support for key sectors such as industry, technology, and social welfare,” it said.