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Pakistan Federal Budget 2025–26: Key Highlights and Allocations
ISLAMABAD – June 11, 2025
Federal Finance Minister Muhammad Aurangzeb presented the much-anticipated Rs17,573 billion budget for the fiscal year 2025–26 in the National Assembly on Tuesday.
During his budget speech, Minister Aurangzeb expressed gratitude to Prime Minister Shehbaz Sharif, Bilawal Bhutto Zardari, Khalid Maqbool Siddiqui, and others for their support. He described this budget as historic, presented at a time of national unity in the face of recent regional tensions. He credited the country’s military and political leadership for their effective response during the crisis with India.
Opposition Uproar During Budget Speech
The session witnessed noisy protests and disruptions from opposition benches as the finance minister began his address. Despite the commotion, the minister emphasized that the government’s economic reforms had earned the confidence of the International Monetary Fund (IMF).
Major Budget Allocations
Defence Sector
- Rs2,550 billion allocated, a rise from last year’s Rs2,122 billion.
- Reflects continued commitment to national security amidst rising regional challenges.
Development Programme
- Rs1,000 billion allocated for the Public Sector Development Programme (PSDP).
- Rs662 billion directed to 31 federal ministries and divisions.
- Rs332 billion for state-owned entities, including the National Highway Authority.
- Focus on energy, infrastructure, water, and regional development.
Economic Indicators
Budget Deficit
- Rs6,501 billion, a reduction from Rs7,283 billion the previous year.
Growth Projections
- GDP growth target: 4.2%
- Agriculture: 4.5%
- Industry: 4.3%
- Services: 4%
Inflation
- Target set at 7.5% for FY2025–26.
Revenue Goals
- FBR target: Rs14,131 billion.
- Non-tax revenue target: Rs5,187 billion (up from Rs3,587 billion last year).
Interest Payments
- A significant Rs8,207 billion earmarked for servicing national debt.
Federal & Provincial Distribution (NFC Award)
- Almost 60% of the Federal Divisible Pool (FDP) to be transferred to provinces—estimated at Rs8,000 billion.
- The federal government retains around Rs6 trillion in tax revenue and Rs4,000–4,500 billion in non-tax revenue.
Key Sector-Wise Highlights
Energy Reforms
- Up to 31% reduction in electricity tariffs for industries.
- Relief announced for 10.8 million low-income households.
- Closure of inefficient, furnace oil-based power plants.
- Renegotiated agreements with Independent Power Producers (IPPs).
Taxation Changes
- Cash withdrawal tax for non-filers increased from 0.6% to 1%.
- Non-filers prohibited from opening new bank accounts.
- Sales tax on imported solar panels set at 18% to promote local manufacturing.
Salaries, Pensions & Tax Relief
Government Employees
- Salaries increased by 10%.
- Pensions raised by 7%.
- Rs1,055 billion allocated for pension payments.
Salaried Class Tax Relief
- Reduced tax rates across all brackets:
- Annual income between Rs600,000–1.2 million taxed at 1%.
- Income up to Rs2.2 million taxed at 11% (down from 15%).
- Income between Rs2.2–3.2 million taxed at 23%.
Sectoral Investments
Agriculture
- Special committee to be formed for federal-provincial coordination.
- Low-interest loans planned for small farmers.
IT Sector
- 21.2% growth in exports recorded.
- $3.1 billion in IT exports over 10 months.
- Government targets $25 billion in IT exports in coming years.
Education
- Rs39.5 billion for the Higher Education Commission (HEC) to support 170 projects.
- Rs18.5 billion for additional education initiatives.
- Rs9.8 billion allocated to establish 11 new Daanish Schools.
- Rs4.8 billion designated for 31 science and technology projects.
Healthcare
- Rs14.3 billion set aside for healthcare development.
- Rs4 billion for Jinnah Medical Complex, Islamabad.
- Rs2 billion for Integrated Disease Surveillance System (IDSRS).
- Rs1.7 billion for a new cancer hospital in Islamabad.
- Rs900 million for equipment procurement for federal hospitals.
- Rs1 billion for Hepatitis C eradication efforts.
Climate Strategy & Social Welfare
Climate Finance
- Government aims to secure $40 billion in funding over 10 years through World Bank and IFCC partnership.
Benazir Income Support Programme (BISP)
- Allocation increased by 20% to Rs716 billion.
- In FY2024–25, 10 million children and 9.9 million families benefited.
This comprehensive budget reflects the government’s strategic focus on economic stability, national security, social protection, and development. While offering relief to the salaried class and making ambitious plans for IT growth and climate resilience, it also prioritizes reforms in agriculture, energy, and education to ensure long-term progress.
