ISLAMABAD:
The government will on Friday (today) unveil a huge consolidated budget of Rs 17.5 trillion (approximately $61 billion) for fiscal year 2026-27 to meet the International Monetary Fund’s strict austerity conditions.
The framework sets an ambitious Federal Board of Revenue fiscal target of Rs 15,267 trillion and targets GDP growth of 4.1%.
The high-risk spending plan balances fiscal tightening and structural directives from the IMF while introducing relief measures for the poorest citizens and modest wage increases for government workers.
The budget comes at a time when much of the population continues to feel the effects of the war between Iran and the United States, with no signs that the conflict is easing.
The government will propose measures to increase revenues and cut spending while protecting the country’s poorest.
Under pressure from the International Monetary Fund to meet austerity conditions, Finance Minister Muhammad Aurangzeb will present to the National Assembly a delayed 17.5 trillion rupees ($61 billion) spending plan for the fiscal year starting next month.
The budget was formulated keeping in mind the existing challenges faced by the economy on the national and international fronts.
Apart from fiscal management, the budget would include revenue mobilization, measures for economic stabilization and growth, reduction of non-development expenditure, job creation and people-friendly policies for socio-economic prosperity of the country.
The burden of higher fuel and energy costs and taxes will fall heavily on formally registered businesses and salaried workers as politically powerful sectors such as agriculture, retail and real estate remain difficult to tax, experts say.
Authorities must deal not only with the conditions of the latest IMF bailout package, but also with the enormous impact of the US-Israel war against Iran, a conflict in which Islamabad has sought to mediate.
The war-induced surge in oil prices has pushed Pakistan’s inflation back into double digits just as the economy appeared to be finding its footing.
The government is targeting economic growth of 4.1% for the 2026-2027 fiscal year, above the 3.7% projected for this year and above the 3.5% forecast by the IMF, and is targeting inflation of 8.2% for the full year, well below the 11.7% reported in May.
But business confidence was the lowest in May since S&P began its manufacturing survey last year, while input costs hit a 21-month high and employment fell for a second month.
The central bank raised interest rates by one percentage point in April, its first increase in nearly three years. The government is pressuring the Federal Board of Revenue to increase next year’s tax collection to 37% above this year’s target, something the agency will not meet.
Pakistan’s vast unofficial economy keeps much of Pakistan’s cash out of the reach of the FBR: Only 1.3% of Pakistanis filed returns showing taxable income last year, and only 7.7% of adults have a debit or credit card.
The number of taxpayers has increased, but income has not kept pace. Corporate tax rates are already high by global standards, while raising the income tax would crush purchasing power still recovering from two years of inflation.
Economic development spending is feeling the pressure: Planning Minister Ahsan Iqbal said no new projects would be launched next year, except for defense and interior policies.
The budget is expected to protect the poorest citizens by providing them with cash transfers. The government has not explained the week-long delay in presenting the budget.
