With multiple external and internal shocks rocking Pakistan’s economy, the federal government is all set to present the much-awaited annual budget today.
Finance Minister Muhammad Aurangzeb will introduce the Finance Bill 2026-27 in the National Assembly, followed by the Senate.
This comes a day after Aurangzeb presented the Economic Survey 2025-26, which shows that Pakistan’s gross domestic product (GDP) reached its highest size ever, but the South Asian nation missed its growth target due to external shocks.
Now that the government is set to reveal the budget today, here’s a comprehensive guide to all the financial terms to help you understand the contours of the finance bill.
GDP
Gross domestic product or GDP is the total monetary or market value of all finished goods and services produced within a country’s borders in a specific time period.
PSDP
The Public Sector Development Program (PSDP) is a major public intervention to stimulate private investment by developing human capital and improving infrastructure. The PSDP is aligned with the government’s overall long-term development objectives.
Revenue
The revenue budget provides the details of the sources from where the government’s revenue comes. Income can be further classified into tax income and non-tax income.
- Tax revenue: All revenue collected from income and profits taxes, social security contributions, goods and services taxes, payroll taxes, property and property transfer taxes, and other taxes.
- Non-tax income: these are recurring income obtained by the government from sources other than taxes; These include royalties, dividends on government investments in state-owned enterprises, etc.
oil tax
A federal government fee imposed on petroleum products such as gasoline and diesel. It is collected per liter, is included in fuel prices and constitutes an important source of non-tax revenue for the government.
Spent
Public expenditure or expenditure includes all government consumption, investment, and transfer payments. It can be further classified into capital expenditure and revenue expenditure.
- Capital Expenditure: The amount spent creating assets, basically long-term expenses. It is a cause for a reduction in government liabilities. It adds to the capital stock of the economy and is non-recurring in nature.
- Revenue Expenses: These are short-term expenses used in the current period or typically within a year.
Fiscal deficit
It is a shortfall in a government’s revenue compared to its spending. A government that has a fiscal deficit is spending beyond its means.
Financing
Financing is the process of providing funds for business activities, making purchases or investing.
Budget deficit
A budget deficit occurs when expenditures exceed revenues and can indicate the financial health of a country.
Debt/GDP ratio
The debt-to-GDP ratio is the metric that compares a country’s public debt to its GDP.
Subsidies
A subsidy is a benefit that the government grants to the people. It can be direct (such as cash payments) or indirect (such as tax exemptions).
debt service
Debt service is the cash required to cover the interest and principal payments on a debt over a given period.
Taxes-GDP
A tax-to-GDP ratio is a figure to measure a nation’s tax revenue in relation to the size of its economy as measured by GDP.
