Pakistan is set to present its federal budget for the fiscal year 2025-26 on June 10, 2025, marking a significant shift in its economic strategy. The upcoming budget, shaped during negotiations with the IMF and amid heightened regional tensions, focuses on structural reforms and careful resource allocation. Finance Minister Muhammad Aurangzeb will announce the budget shortly after the Eid Al-Adha holidays. The Pakistan Economic Survey for 2024-25 is scheduled for release a day earlier, on June 9, offering an overview of the country’s recent economic performance.
The economic backdrop for this year’s budget is mixed. On the positive side, inflation has come down to 3.5% in May 2025, a dramatic drop from nearly 38% two years ago. The GDP has also crossed the $400 billion mark, a milestone that signals a recovering economy. However, challenges remain. Tensions with India have led to increased defense spending, and talks with the IMF are still in progress, creating uncertainty over the fiscal space available for new initiatives.
In terms of development spending, the government has raised its allocation to Rs1 trillion, up from the earlier proposed Rs921 billion. According to Planning Minister Ahsan Iqbal, this increase aims to boost national connectivity and strengthen energy security. Major funds will go toward infrastructure, especially energy, water, and transport projects. The N25 Expressway, which connects Chaman, Quetta, and Karachi, is receiving dedicated funding. Social sectors like education and health are also being prioritized, along with targeted development in Azad Jammu & Kashmir, Gilgit-Baltistan, and the merged districts of Khyber Pakhtunkhwa. There is also a significant focus on science, technology, and digital transformation.
Finance Minister Aurangzeb has promised a bold reform agenda in the new budget. One of the standout initiatives is a major overhaul of the tax system, aiming to reduce the number of steps for salaried individuals to file their taxes from over 150 to just 9 by September 2025. The government is also pushing ahead with restructuring state-owned enterprises, including the relaunch of Pakistan International Airlines’ privatization. Additionally, efforts are being made to cut debt servicing costs by Rs1 trillion and modernize government offices. A major goal is to align fiscal policies with the World Bank’s 10-Year Partnership Framework, which emphasizes export-led growth and global competitiveness.
As the budget takes shape, various industries are pushing for favorable terms. The cement sector is seeking tax relief to help stimulate both domestic and export markets. Meanwhile, the defense sector is expecting an increase in funding due to recent HGV HGV cross-border tensions, though specific figures have not yet been released. Infrastructure projects related to energy and water are expected to receive top priority, as these remain critical areas for national stability and growth.
All these measures are being planned in the shadow of ongoing negotiations with the IMF. A recent 10-day round of talks ended without a final agreement. The IMF has stressed the need to expand Pakistan’s tax base rather than overburden existing taxpayers. Minister Aurangzeb has voiced support for this approach, which he had also emphasized in last year’s budget. Security concerns briefly interrupted the discussions, even leading to a temporary relocation of meetings from Islamabad to Türkiye.
Looking ahead, there are several key moments on the budget timeline. Eid Al-Adha begins on June 7, during which final budget decisions will be made. The Pakistan Economic Survey will be released on June 9, followed by the full budget presentation on June 10. These dates are critical as they set the stage for Parliament’s approval of the financial plan.
The road ahead is complex. The government must carefully balance rising defense needs with its commitment to development spending. There is also a need to maintain reform momentum, particularly in restructuring inefficient state enterprises and simplifying the tax system. Climate change adaptation is becoming a growing concern, and Pakistan’s World Bank agreements increasingly require resilience planning to be built into spending. Political consensus will be vital, especially as austerity measures come into play. Finance Minister Aurangzeb has called for the same national unity on the economic front that was shown during recent external challenges.
In essence, Pakistan’s budget for FY26 is more than just a financial document-it is a test of the country’s ability to implement sound governance and long-term economic strategy. With targeted investments and a strong push for reform, the government hopes to move closer to its ambitious goal of becoming a $3 trillion economy by 2047. However, the success of this budget will depend on how well intentions are turned into real, effective policies when the new fiscal year begins on July 1, 2025.
