Budget offers relief after economic stabilization: Tarar

ISLAMABAD:

Information Minister Attaullah Tarar on Wednesday described the next fiscal year’s budget as “relief-oriented,” saying the country had moved from the risk of economic default to stabilization following structural reforms in taxation, governance and law enforcement.

On June 12, Finance Minister Muhammad Aurangzeb presented the federal budget for fiscal years 2026-27 in the National Assembly, proposing total federal spending of around Rs 18 trillion and setting an economic growth target of 4%. He described the budget as anchored in “stabilization, reform and growth.”

Aurangzeb said the economy had grown 3.7% in fiscal years 2025-26 despite floods and regional tensions, reaching a size of $452 billion. Per capita income rose to $1,901, while large-scale manufacturing posted its strongest performance in four years.

In a detailed briefing on the federal budget for 2026-2027, Tarar, speaking alongside Minister of State for Finance Bilal Azhar Kayani, said the government had presented the financial plan after a difficult period of economic uncertainty.

He said the next fiscal year was being approached with a focus on public aid along with continued macroeconomic stability. He added that engagement with the International Monetary Fund had been crucial to avoiding default and restoring economic confidence.

Referring to past uncertainty, he said that without progress in the talks in Paris, “there was a risk that the country would have defaulted.” He added that the prime minister had personally played a key role in securing agreements that would lead to stabilization.

Tarar said reforms in tax dispute resolution had also improved recoveries, with new courts being established and long-pending cases expedited. He said the removal of the suspension orders had enabled significant additional revenue collection, adding: “In the last year alone, enforcement measures have generated around Rp800 billion.”

The minister said these tax gains had allowed the government to introduce a comprehensive package of tax relief measures.

He said salaried individuals earning up to Rs 50,000 a month would not pay income tax, while those earning between Rs 50,000 and Rs 100,000 a month would face an income tax rate of about one per cent.

He added that further reductions had been introduced in higher income brackets to ease pressure on middle-income groups, and said the policy was aimed at ensuring that “the burden does not fall disproportionately on the salaried classes”.

A major part of the briefing focused on reforms at the Federal Board of Revenue (FBR), which Tarar said had been instrumental in improving revenue collection and creating fiscal space for tax cuts.

“There were several problems in the FBR,” he said. “Digitalization had stagnated, officials were corrupt and appointments were made by recommendation.” He said the government had ended influence-based positions and introduced a merit-based system.

He stressed that “appointments are no longer made by recommendation”, warning that any attempt to circumvent the procedures would result in disciplinary action. He said officials were now being evaluated through structured assessments and placed on merit.

“There is now a faceless assessment system and no direct contact with customs officials,” he said, adding that clearance times have been reduced from weeks to days through automation and digital processing. Under the system, importers and exporters clear goods digitally using goods declaration numbers without direct interaction with customs officials.

Read: Budget 2026-27: FinMin projects 4% growth as government reveals fiscal, tax and reform agenda

On revenue enforcement, the minister said the government’s anti-evasion measures had significantly increased revenue collection across multiple sectors including sugar, tobacco, beverages and cement.

He said the sugar industry had been the first major sector to undergo digital monitoring, with production and sales tracked through cameras and barcode systems.

“Production and sales are monitored through a computer system, with barcode and QR code tracking,” he said, adding that the reforms had generated around Rs 60 billion in additional revenue in the sugar sector alone.

He further said that the tobacco industry had shown leakages estimated at around Rs 200 billion, which were being addressed through law enforcement operations against illegal trade.

Regarding housing policy, Tarar said the government had reduced taxes on small real estate transactions and prioritized construction as a driver of economic activity.

He said Rs 90 billion had been allocated for the ‘Apna Ghar’ scheme, and Rs 11 billion had already been disbursed, adding that the construction activity would generate demand in over a dozen allied industries, including cement, steel and construction materials.

He further said that export competitiveness had also been strengthened through the removal of advance tax and super tax for exporters, along with a reduction in export refinancing rates to four per cent compared to market rates of around 11 per cent. He said these measures were aimed at boosting investment, production and employment.

The briefing also highlighted youth-focused programs, including agricultural and business loans that are expected to benefit some 550,000 youth. Tarar said investments in skills development and sports initiatives, along with the expansion of educational institutions such as Danish schools, were part of a broader human capital strategy.

In agriculture, he said import duties on machinery, including tractors, combine harvesters, pumps and related equipment, had been abolished to reduce costs for farmers. He added that financial support would be expanded through lower interest rates under a “Zarakhizi” scheme, while research institutions would be reformed on the basis of merit.

It also said that around 3.5 million retailers were currently outside the tax net and would be brought into it through a simplified flat tax scheme developed after consultations with trader organisations. Under the plan, retailers would pay a minimum annual tax of Rs 25,000 and receive formal registration, while benefiting from simplified compliance requirements.

Read more: The money is there, but not in the budget.

Tarar confirmed that the Benazir Income Support Program had been expanded to 833 billion rupees, supporting more than 10 million families. He said the eligibility criteria were aligned with international standards in collaboration with the World Bank, and the payments were largely disbursed to women in beneficiary households.

She added that the budget also included tax exemptions on reproductive health products for women, with the aim of reducing costs and improving access to essential healthcare.

Turning to the private sector, he said the government had increased the minimum wage by 10 percent and increased public sector salaries, while ensuring that self-employed workers and IT professionals were not subject to additional taxes. “There is no additional tax burden for the self-employed,” he said, describing the IT sector as a priority for growth.

Tarar said Prime Minister Shehbaz Sharif was always ready to provide help, adding that relief in the budget had been extended to all segments of the society. He said the government was moving towards export-led growth, while new courts had been formed to improve the resolution of tax disputes.

He said Pakistan had previously been in a fragile economic position where, as he said, “some government officials even went on leave because they did not want a default to occur during their tenure.” He added that at that time “no one was willing to take responsibility for the economy,” describing the period as marked by uncertainty and indecision.

According to Tarar, the situation stabilized under the leadership of the Pakistan Muslim League-Nawaz. He said the party leadership intervened during a critical phase and guided the economic management, crediting former Prime Minister Nawaz Sharif’s vision and Prime Minister Shehbaz Sharif’s execution of economic policy.

Concluding the briefing, Tarar described it as “a reform- and relief-oriented budget achieved through teamwork,” adding that the government remained committed to long-term economic stability, growth and recovery.