Business leaders offer mixed response to Budget 2026-27

Business chambers and industrialists expressed mixed views about the federal budget 2026-27, while dubbing it neither good nor bad.

Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), acknowledged the presentation of the Rs18.7 trillion Federal Budget 2026-27, commending the government’s efforts toward macroeconomic stabilisation – while urging a stronger transition toward sustained economic and industrial growth.

Speaking to the business community and media in a post-budget session on Friday, he congratulated Prime Minister Shehbaz Sharif and the government’s economic team on their third federal budget, noting that it reflected a vital continuity of economic policy.

Sheikh said Pakistan’s economy has shown encouraging signs of stability; with GDP growth improving to 3.7%, the fiscal deficit reducing to 0.7% of GDP, and public debt servicing costs declining by 23% – “the economy has undeniably moved toward fiscal discipline”.

“However, the federal budget is not merely a statement of revenue and expenditure; it is a critical policy document that must dictate transition from sheer stabilisation to robust economic growth,” he said.

He expressed appreciation that several of its key recommendations were incorporated into the budget, signaling a partial shift toward a “Growth-Driven Model”.

Key budget measures welcomed by FPCCI include:

Tax relief: The abolishment of the Capital Value Tax (CVT) on foreign assets and the elimination of the Federal Excise Duty (FED) on international business class travel.

Super tax reforms: The abolishment of the Super Tax on six slabs up to Rs500 million, a reduction from 10% to 8% for incomes exceeding Rs500 million, and a complete waiver for exporters.

Salaried class support: The elimination of the surcharge on salaried individuals and considerable reductions in tax rates across all slabs.

Sector-specific incentives: The extension of the 0.25% final tax exemption on IT exports until June 2029, and the reduction of Withholding Tax (WHT) for filers in the construction sector by 50% (from 2.5% to 1.25% on purchase, and 5.5% to 2.75% on sale).

Retail digitalisation: A new 1% fixed sales tax scheme for retailers with annual sales under Rs200 million, exempting them from POS machines and routine audits via a green QR code system.

Exporter relief: A revised 1.25% Minimum Tax for exporters, replacing the previous 1% Minimum and 1% Advance Tax structure.

Sheikh said despite the positive indicators, FPCCI highlighted significant concerns regarding the overarching economic environment.

“The Investment-to-GDP ratio remains stagnant at 14.38%, and the savings rate has declined to 14.13%. Most alarmingly, urban poverty has surged from 11% to 17%, reflecting a significant downturn in core business activities.”

He voiced strong reservations regarding the Federal Board of Revenue’s (FBR) tax collection target of Rs15.2 trillion (a 17% increase) and the petroleum levy target of Rs1.7 trillion (an 18% increase).

The federation warned that these targets risk further fueling inflation amid already high international oil prices.

Meanwhile, Chairman Businessmen Group (BMG) Zubair Motiwala, while terming the Federal Budget 2026-27 as “neither good nor bad”, observed that despite some positive measures, the overall budget lacked a clear strategy for export growth, industrial revival and economic expansion.

Addressing a press conference after the Finance Minister’s budget speech, Zubair Motiwala said that economic indicators presented in the Economic Survey had raised expectations that the government would utilise the available fiscal space to provide meaningful support to exports and industry.

“However, the budget failed to offer any major incentive capable of accelerating exports and enhancing Pakistan’s competitiveness.”

Expressing disappointment over the government’s decision regarding the Final Tax Regime (FTR), he said the business community had strongly advocated restoration of a simple fixed tax regime for exporters in order to spare them unnecessary interaction with tax authorities and cumbersome documentation requirements.

“Instead of accepting this demand, the government reduced the withholding rate from 2% to 1.5% but converted it into a minimum tax, thereby forcing exporters to remain within the normal taxation system.

“This defeats the very objective of FTR. Exporters do not want additional complications and frequent dealings with tax authorities. We wanted certainty and ease of doing business, but unfortunately that objective has not been achieved“, he remarked.

Chairman BMG, however, welcomed the reduction in Super Tax rates and the complete abolition of Super Tax for companies earning profits up to Rs500 million, describing it as a positive development and partial acceptance of a longstanding demand of the business community.

“Reduction in Super Tax is certainly a step in the right direction, but Super Tax itself is an extraordinary levy and should ultimately be abolished altogether. Pakistan already has one of the highest corporate tax burdens in the region and the continuation of Super Tax discourages industrial expansion and investment“, he added.

Zubair Motiwala regretted that the budget remained silent on one of the most pressing concerns confronting industry, namely the high cost of electricity and gas. He noted that no concrete roadmap had been provided to reduce energy tariffs or address the burden of circular debt being unfairly passed on to productive sectors.

He pointed out that industries across Pakistan were operating below capacity and stressed that the country’s economic future depended entirely on export-led growth.

“Pakistan needs dollars and dollars can only come through exports. Exports will increase only when industries operate competitively. Without industrial growth, there can be no sustainable increase in revenues, no fresh investments and no meaningful economic progress”, he emphasised.

Chairman BMG questioned how the government expected to achieve a revenue target of Rs15 trillion and generate an additional Rs1.5 trillion without creating an enabling environment for businesses and industries.

He criticised the continued tendency to place additional burdens on existing taxpayers instead of broadening the tax base, stating that documented sectors were being subjected to increasing scrutiny while vast segments of the economy continued to remain outside the tax net.

Despite these concerns, Motiwala appreciated several measures announced in the budget, particularly the reduction in income tax rates for the salaried class, the relief provided to the construction and real estate sectors, continuation of concessions for electric vehicle kits and the government’s emphasis on automation and digitisation of tax administration.

Meanwhile, the S.I.T.E. Association of Industry (SAI) reviewed the Federal Budget 2026-27 with cautious appreciation for certain measures but deep disappointment that it falls far short of what the manufacturing sector urgently requires.

SAI President Abdul Rehman Fudda stated, “Our members welcome the intent but reject the pace. Tariff reforms spread over five years, a marginal Super Tax reduction without a legislated sunset, and complete silence on industrial energy pricing will not revive factories operating at half capacity today. Industry needed a breakthrough budget; it received an incremental one”.

The association’s export-oriented members—including textiles, light engineering, chemicals, and processed goods—are particularly disappointed. The reduction in export withholding tax from 2% to 1.25% is a modest relief for a sector carrying an effective tax burden that industry bodies estimate exceeds 68%. The long-demanded restoration of the Final Tax Regime has not been addressed.