Pakistan Federal Budget 2025–26: Economic Outlook, Key Measures, and IMF Commitments

Introduction

Pakistan is set to present its Federal Budget for the fiscal year 2025–26 on June 10, 2025, as announced by Finance Secretary Imdad Ullah Bosal. With serious talks ongoing with the International Monetary Fund (IMF), this budget is not just a fiscal plan—it is a roadmap aimed at calming a delicate economy, increasing revenue, and applying structural reforms.

This in-depth analysis discovers everything you need to know: from fiscal targets and tax reforms to development provisions and sectoral priorities—offering actionable insights for citizens, investors, and businesses.

Key Highlights of Budget FY 2025–26

1. Budget Size and Fiscal Deficit

• Total Budget Outlay: Rs18.9 trillion
• Fiscal Deficit Target: 6.5% of GDP (reduced from 7.2% in FY24)
• Primary Deficit: Projected to be 0.3% of GDP

This reduction signals tighter fiscal discipline aligned with IMF recommendations (source).

2. Revenue Goals and Tax Collection

• FBR Revenue Target: Rs13 trillion
• Revenue Strategy:
  • Broadening tax base through digitization and inclusion of informal sectors
  • Rationalization of tax exemptions
  • New taxes on luxury goods and non-essential imports

Pakistan has also updated its FBR Tax Directory, promoting transparency in public revenue (FBR Tax Directory 2023).

3. IMF Program and Loan Discussions

Pakistan is expected to negotiate a new loan program ranging from $6–8 billion with the IMF, contingent upon:

• Reduction in energy subsidies
• Strengthened tax compliance
• Market-based exchange rate management

Read more on the evolving IMF program here: Reuters: Pakistan Seeks IMF Bailout

Development Priorities: PSDP and Infrastructure

1. Public Sector Development Programme (PSDP)

• Allocation: Rs3.79 trillion
• Focus: Infrastructure, water, energy, health, and education

2. Major Projects Include:

• Completion of Jamshoro Power Plant (1200 MW)
• NTDC grid modernization
• Road and rail upgrades, including ML-1 project

A comprehensive list of projects is available in the official Ministry of Planning PSDP portal (source)

Sector-Wise Budget Allocations

1. Defense

• Allocation: Rs2.122 trillion
• 15% increase to address internal and external security concerns

2. Education

• Federal Allocation: Rs100 billion+
• HEC Budget: Rs60 billion for higher education development

3. Health

• Allocation: Rs80 billion
• Focused on digitized healthcare systems, immunization, and maternal care

4. Agriculture and Food Security

• Rs5 billion Kissan Package
  • Solar-powered tube wells
  • Duty-free seed import
  • Rs2,250 billion for agricultural credit

Tax Reforms and Revenue Enhancements

New Tax Policies

• Increased FED on mobile phones, cigarettes, sugary drinks
• WHT on non-filers for property and banking transactions
• GST harmonization across provinces

Pakistan’s shift to digital tax administration, e-invoicing, and POS systems is critical for enforcement (OECD: Digital Taxation).

Macroeconomic Targets for FY 2025–26

These targets reflect optimism but require favorable energy prices and political stability (World Bank Report on Pakistan).

Public Reaction and Opposition Response

Criticisms

• Opposition claims no relief for the middle class
• Concerns over indirect taxes and austerity-focused development

Government Defense

• Budget is designed to restore investor confidence
• Structural reforms are necessary for long-term fiscal sustainability

Actionable Insights for Businesses and Citizens

For Salaried Individuals

• Monitor revised income tax slabs
• File returns early to avoid new penalties

For SMEs and Exporters

• Take advantage of:
  • Reduced export duties
  • SME credit facility programs
  • Tax rebates for exporters

Visit SMEDA Pakistan for available support programs.

Conclusion