Pakistan Unveils Austerity Budget for Fiscal Year 2025-26 with Significant Expenditure Cuts

Strategic Insights -

The Pakistani government has introduced its much-anticipated budget for fiscal year 2025-26, marking a shift towards austerity and improved financial management. The budget proposes a substantial cut in overall expenditures, amounting to Rs 1,304 billion, one of the largest year-over-year (YoY) spending reductions in recent years. The most significant cuts are in current expenditure and development spending, which have been lowered by Rs 917 billion and Rs 400 billion, respectively. The government aims to trim wasteful spending, reduce reliance on debt, and align priorities with available fiscal space.

Key Takeaways:

  • The total federal expenditure has been slashed from Rs 18,877 billion in 2024-25 to Rs 17,573 billion for 2025-26, representing a reduction of Rs 1,304 billion.
  • Current expenditure has been lowered from Rs 17,203 billion to Rs 16,286 billion, while development spending has dropped from Rs 1,400 billion to Rs 1,000 billion.
  • The government has emphasized the importance of responsible spending, protecting critical sectors, and safeguarding social safety nets and essential services, despite spending curbs.
  • The budget deficit is projected to decrease from Rs 8,500 billion in the previous FY to Rs 6,501 billion, narrowing the deficit from 5.9% of GDP to 5.0%.
  • The Federal Board of Revenue (FBR) has been tasked with collecting Rs 14,131 billion, up from Rs 12,970 billion last year, representing a growth of over 10%.
  • Non-tax revenues are also projected to rise, contributing to a net federal revenue of Rs 11,072 billion.

Statistics:

  • Total federal expenditure: Rs 17,573 billion (2024-25: Rs 18,877 billion, reduction: Rs 1,304 billion)
  • Current expenditure: Rs 16,286 billion (2024-25: Rs 17,203 billion, reduction: Rs 917 billion)
  • Development spending: Rs 1,000 billion (2024-25: Rs 1,400 billion, reduction: Rs 400 billion)
  • Budget deficit: Rs 6,501 billion (2024-25: Rs 8,500 billion, % decrease: 23.7%)
  • Growth in revenue: 10.2%
  • Net federal revenue: Rs 11,072 billion
  • FBR target: Rs 14,131 billion (growth over previous FY: 10.4%)

Sources:

  • Pakistan government budget documents (2025-26)
  • Federal Board of Revenue (FBR) annual report (2024-25)