The Federal Budget 2026–27 arrived at a peculiar moment in global history. As Finance Minister Muhammad Aurangzeb rose to present Pakistan’s fiscal plan to the nation, oil prices were only beginning to ease from the extraordinary volatility that had gripped energy markets for months. The US-Iran conflict, which had effectively shuttered the Strait of Hormuz, the narrow waterway through which roughly a fifth of the world’s oil flows, sent Brent crude surging to nearly USD 110 a barrel at its peak, a nearly 80 percent rise in a matter of weeks. Pakistan, a country that imports most of its energy, bore that burden quietly and painfully.
The deal reached between the United States and Iran this past weekend, reopening the Strait and beginning a 60-day nuclear negotiation window, is genuinely significant news. For a country like Pakistan, where energy import costs have been a persistent wound on the current account, the prospect of normalising oil prices is the difference between fiscal space and fiscal suffocation. The Government of Pakistan, Prime Minister Shehbaz Sharif, and Chief of Defence Forces Field Marshal Syed Asim Munir, all of whom played a meaningful mediation role in the ceasefire process, deserve our sincere compliments besides global recognition. If oil stabilises, the budget the Finance Minister has presented becomes more manageable. If it doesn’t, some of the assumptions underpinning it will need revisiting. That is not a criticism. Unfortunately, it is the reality of governing an import-dependent economy in an unpredictable world.
Against that backdrop, it would be unfair to read the Federal Budget 2026–27 without acknowledging what it is up against. IMF commitments constrain the room for manoeuvre. External imbalances persist. And the weight of years of deferred structural reform sits heavily on the shoulders of every finance minister who takes the podium. This is not a budget written in comfort. OICCI recognises that, and our assessment is offered in that spirit.
That said, there are a few things that need the government’s utmost attention. The cash economy grew from Rs9 trillion last year to Rs12 trillion this year, a 33 percent surge in a single year. This is not a statistical footnote. It is a policy challenge that, left unaddressed, will hollow out any revenue gains the formal sector helps achieve.
The partial rationalisation of the super tax, its abolition for income slabs between Rs150 million and Rs500 million, and a reduction from 10 percent to 8 percent for incomes above that threshold, is a constructive step. It eases pressure on mid-sized formal enterprises, and it reflects a direction OICCI has long advocated. Similarly, the reduction in withholding and advance tax on export proceeds from 2 percent to 1.25 percent sends the right signal to our export community. The rationalisation of advance tax in the real estate sector, and targeted relief for the IT sector, add to a package of measures that, taken together, show a government that is listening even if it has not always been able to act as boldly as the moment may require.
Perhaps the most consequential structural announcement in this budget is the proposed National Faceless Assessment Centre. For years, OICCI members have flagged taxpayer-officer contact as a source of uncertainty, inconsistency, and, let us not shy from the word ‘harassment’. A system-based assessment regime, if implemented faithfully, could change that culture. It would make compliance more predictable for honest businesses and reduce the discretion that has sometimes been exercised against them. The intent is right. We will be watching the delivery closely.
But a balanced assessment must also name what is missing.
After a tense period of past two years, the Government of Pakistan has finally proposed sales tax exemption on refinery expansion, which was a material constraint on an industry that has the potential to attract between USD 6-10 billion in new foreign direct investment. As global energy prices eventually normalise, and the Iran deal may accelerate that, Pakistan has an opportunity to position itself as a refinery hub for the region. That window will not stay open indefinitely. Unlocking it requires policy clarity, and this budget has just partially provided it.
The budget leaves untouched the Minimum Tax on Turnover under Section 113 and the Alternate Minimum Tax under Section 153 of the Income Tax Ordinance. These provisions tax companies on their revenues rather than their profits. In low-margin sectors such as distribution, logistics, and certain manufacturing lines, this can mean paying tax in years when a business is running at a loss. It is a structural distortion, and it deserves a structural fix.
There is also the unresolved matter of pending refunds. Corporate income-tax and sales-tax refunds that remain stuck in the system are a liquidity constraint on companies that have done everything right, filed on time, paid what was owed, and now wait. A time-bound mechanism to clear these refunds would cost the government relatively little in the short run and would signal, loudly and credibly, that Pakistan respects its obligations to the business community.
Let me close with a reflection that goes beyond the line items.
We are living through a period of profound global disruption. A war in the Middle East nearly severed the arteries of global energy trade. Oil swung from the sixties to over a hundred dollars and is only now beginning to retreat. Supply chains that took decades to build have been stress-tested in ways their architects never anticipated. In this environment, every country is being asked a version of the same question: are you a stable place to do business?
Pakistan has compelling answers available to it. A young population, a strategic location, an improving security environment in parts of the country, and a government that has, to its credit, maintained fiscal discipline under genuinely difficult conditions all while playing a key role in a war that could have had serious cascading effects for the whole world. The budget before us reflects some of that seriousness. It is not a budget that will transform the investment climate overnight, and we have already said so during the past few days. But it is also not a budget that deserves dismissal.
What it requires is follow-through. The Finance Bill must address the gaps on refunds and on minimum tax distortions. And beyond the Finance Bill, the work of widening the tax base, formalising the cash economy, and rebuilding the trust of the investor community must continue, budget after budget, year after year.
The world is watching Pakistan with more interest than many here might realise. Let us give it reasons to stay engaged.
Copyright Business Recorder, 2026
The writer is Chief Executive/Secretary-General OICCI
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