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Cabinet officials

Pakistan Presents Second Growth-Driven Federal Budget for FY 2025-26

Strategic Insights

— 2 min read

The coalition government in Islamabad has introduced its second growth-driven federal budget for the fiscal year 2025-26, totaling Rs. 17.573 trillion. The budget aims to enhance exports, improve foreign exchange reserves, reduce fiscal imbalances, and encourage economic productivity. Finance Minister Senator Muhammad Aurangzeb presented the budget before the national assembly, highlighting the government's commitment to economic stability and progress in the face of Indian aggression.

The budget outlines significant measures to ease public hardship, including a 10% increase in salaries for employees from Grade 1-22, a 7% increase in pension for retired employees, and a 30% reduction in disparity allowances for eligible employees. The government has also proposed special relief allowances for military officers and soldiers/JCOs. A projected economic growth rate of 4.2% is expected for the fiscal year 2025-26, with inflation estimated at 7.5% and a fiscal deficit of 3.9% of GDP.

Key Takeaways:

  • The federal budget for FY 2025-26 totals Rs. 17.573 trillion, a comprehensive fiscal plan for building a competitive economy.
  • A 10% raise in salaries for employees from Grade 1-22 and a 7% increase in pension for retired employees are announced to ease public hardship.
  • A 30% reduction in disparity allowances for eligible employees is implemented, and special relief allowances are proposed for military officers and soldiers/JCOs.
  • A projected economic growth rate of 4.2% is expected for the fiscal year 2025-26, with inflation estimated at 7.5% and a fiscal deficit of 3.9% of GDP.
  • The government aims to enhance exports, improve foreign exchange reserves, reduce fiscal imbalances, and encourage economic productivity.
  • A Rs. Rs.2,550 billion allocation for defense is marked, along with allocations for civil administration, pension, and subsidy on electricity and other sectors.
  • The government intends to increase the coverage of the Benazir Income Support Programme to 10 million beneficiary families, with an increased allocation of Rs. 716 billion.
  • Efforts to reduce the debt-to-GDP ratio from 74% to 70% and plug leakages in State-Owned Enterprises are underway.
  • Priorities include building a competitive and free market for electricity, promoting exports, and encouraging investment, with a focus on IT development, the agriculture sector, and the construction industry.

Statistics:

  • Total federal budget for FY 2025-26: Rs. 17.573 trillion
  • Projected economic growth rate: 4.2%
  • Inflation rate: 7.5%
  • Fiscal deficit: 3.9% of GDP
  • Allocation for defense: Rs. 2,550 billion
  • Allocation for civil administration: Rs. 971 billion
  • Allocation for pension: Rs. 1,055 billion
  • Allocation for subsidy on electricity and other sectors: Rs. 1,186 billion
  • Coverage of the Benazir Income Support Programme: 10 million beneficiary families
  • Allocation for the Benazir Income Support Programme: Rs. 716 billion
  • Expected surplus in the current account: $1.5 billion
  • Expected remittances: $38 billion
  • Reserve level of the State Bank of Pakistan: $14 billion
  • National tax-to-GDP ratio: 12.3% by June 2025

Sources:

  • "Pakistan's Minister of Finance Presents Second Growth-Driven Budget" (APP)
  • "Islamabad: Second Growth-Driven Budget Unveiled" (Anadolu Agency)
  • "Federal Budget 2025-26: Highlights" (The News)
  • "Pakistan's Economic Growth to Reach 4.2% in 2025-26" (Bloomberg)

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