Balancing the books and the battlefield: Pakistan’s fiscal strategy for FY2025–26—III

With an eye on long-term innovation, Rs79 billion is dedicated to the IT sector. Major developments include the Karachi IT Park, Islamabad Technology Park, and a national freelancing platform. The government also aims to scale up IT exports, which have already grown 21 percent year-on-year.

Small and medium-sized enterprises (SMEs) will benefit from increased access to low-cost financing and enhanced risk coverage. Over Rs 300 billion has already been disbursed to 95,000 businesses, with the government planning to double this outreach through new policy tools and financial instruments.

Balancing the books and the battlefield: Pakistan’s fiscal strategy for FY2025-26 – II

Remittances—Pakistan’s most stable source of foreign exchange—rose to USD 38.3 billion last year, a remarkable 27 percent year-on-year increase.

Enhanced services for overseas Pakistanis, such as secure digital transfers, diaspora awards, and legal protections, are helping cement trust and sustain these vital inflows. These remittances serve as a bulwark against external imbalances and are instrumental in maintaining the State Bank’s foreign exchange reserves, which currently stand at a reassuring USD 14 billion.

Balancing the books and the battlefield: Pakistan’s fiscal strategy for FY2025–26—I

The export target for FY2025–26 is set at USD 35.3 billion—a 7.4 percent increase—while imports are expected to grow to USD 65.2 billion. This will result in a trade deficit of nearly USD 30 billion, which the government plans to offset through robust remittance inflows and foreign direct investment. Exporters, especially in textiles, IT, and rice, will benefit from zero-rated tax regimes, tariff rationalization, and simplified refund systems.

A newly proposed Tariff Reform Package aims to reduce maximum duty rates to 15 percent within four years, enhancing global competitiveness and easing the burden on domestic producers.

Muhammad Sheroz Khan Lodhi (Karachi)

Copyright Business Recorder, 2025