Key facts
- Pakistan's proposed budget totals 18.77 trillion rupees ($67.49 billion).
- Defence spending is set to increase by 18% to 3 trillion rupees.
- Federal development spending is capped at 1 trillion rupees.
- The government aims for a primary budget surplus of 2% of GDP to meet IMF targets.
- The tax revenue target is 15.26 trillion rupees.
- Projected economic growth is 4.0% with inflation at 8.2%.
Pakistan's Finance Minister Muhammad Aurangzeb presented a budget of 18.77 trillion rupees ($67.49 billion) for the upcoming fiscal year, prioritizing defence spending and adherence to International Monetary Fund (IMF) targets over development expenditure. Defence allocations are set to rise by 18% to 3 trillion rupees, while federal development spending will be limited to 1 trillion rupees. This move aims to bolster the country's security in a volatile region and maintain the IMF program, which Pakistan narrowly avoided defaulting on in 2023.
The budget reflects Pakistan's constrained fiscal space, with debt payments, defence, and IMF requirements taking precedence. The government has set an ambitious tax revenue target of 15.26 trillion rupees, despite the Federal Board of Revenue missing its previous target. The projected federal deficit stands at 7.02 trillion rupees, with an overall fiscal deficit targeted at 3.6% of GDP. Revenue generation is expected to heavily rely on taxes and levies, including the petroleum levy.
Analysts suggest that the burden of fiscal adjustment will likely fall on salaried individuals and businesses already within the tax net, as politically influential sectors like agriculture, retail, and real estate remain difficult to tax effectively. The budget anticipates economic growth of 4.0% and inflation of 8.2% for the next fiscal year, a slight improvement from recent projections. The government is seeking to secure a new IMF program, requiring a primary budget surplus of 2% of GDP, which leaves little room for tax cuts or new welfare initiatives.