Improved Federal Budget for 2025-26 Reflects Fiscal Responsibility and People-Friendly Policies

Strategic Insights -

The National Assembly recently passed a revised version of the proposed federal budget for 2025-26, incorporating significant improvements and amending the original draft presented by Finance Minister Aurangzeb Khan in June. The revised budget addresses some long-standing concerns of the middle class, introduces checks on tax authorities, and boosts allocations for pro-poor initiatives. While the changes fall short of addressing fundamental tax base issues and structural concerns, they demonstrate a notable step forward in fiscal responsibility and people-friendly policies.

Key Takeaways:

  • The revised budget raises the taxable income threshold from Rs50,000 to Rs1,200,000 annually, more than doubling the previous limit.
  • Import duty on solar panels is reduced from 18% to 10%, providing relief to the renewable energy sector.
  • The minimum wage is increased from Rs37,000 to Rs40,000 per month, benefiting low-income workers.
  • Income tax rates are lowered across several brackets: from 2.5% to 1% for the lowest band, from 15% to 11% for the next, and from 25% to 23% for the one above that.
  • The allocation for the Benazir Income Support Programme (BISP) is raised from Rs592bn to Rs716bn, supporting vulnerable populations.
  • The 2.5% carbon tax is retained but rebranded as Carbon Support Levy.
  • The PPP, a key coalition partner, played a pivotal role in driving these improvements alongside other parliamentarians who actively contributed to the budget debate.
  • Critics highlight the need to link the state's right to impose additional taxes to its performance in delivering promised services, raise the minimum wage to a sustainable level, and realign expenditure priorities to align with the economy's needs.

Statistics:

  • The threshold of taxable income is more than doubled, from Rs50,000 to Rs1,200,000 annually.
  • Import duty on solar panels is reduced from 18% to 10%.
  • The minimum wage is increased from Rs37,000 to Rs40,000 per month.
  • The Super Tax is cut by 0.5 percentage points.
  • Income tax rates are lowered across several brackets, including a 2.5% to 1% reduction for the lowest band.
  • The allocation for the BISP is raised from Rs592bn to Rs716bn.

Sources:

  • The News International (available at [www.thenews.com.pk](http://www.thenews.com.pk))
  • The Express Tribune (available at [www.pressobserver.tv](http://www.pressobserver.tv))
  • A report by Salahuddin Safdar, a parliamentary governance expert with the Free and Fair Election Network (available upon request)
  • A statement by Senator Salim Mandviwala, Chair of the Senate Standing Committee on Finance (available upon request)
  • A note from the Senate Standing Committee on Planning, Development, and Special Initiatives (available upon request)