The federal government has finalised preparations for the upcoming budget for fiscal year 2025-26, with the overall outlay estimated at Rs17.5 trillion —Rs1.3 trillion less than the previous fiscal year. The Federal Board of Revenue (FBR) is expected to be tasked with a tax collection target of Rs14.1 trillion.

According to sources, the budget finalisation includes allocations for defence, development projects, debt servicing, subsidies, grants, and revenue goals. A massive Rs9 trillion has been earmarked for debt servicing alone, Rs7.7 trillion for domestic debt and Rs1.3 trillion for external loan repayments.

Subsidies are expected to cost the exchequer Rs1.4 trillion, while grants may amount to Rs1.62 trillion. The Benazir Income Support Programme (BISP) is likely to receive Rs700 billion. Additionally, the federal government expects a budget surplus of Rs1.2 trillion from the provinces.

In line with IMF recommendations, the government plans to adopt strict austerity measures. These measures include a ban on the purchase of new vehicles for federal ministries and departments, limits on electricity and gas usage, and a freeze on supplementary grants, except in emergencies such as natural disasters. Non-approved expenditures and unannounced projects will also be strictly prohibited.

Budget 2025-26 - Major Relief Expected for Salaried Class & Increase in Govt Employees’ Salaries

Major reforms are expected in the tax system. Sales tax on small vehicles may be raised to 18%, while taxes on dividends are also likely to be increased.

For provincial development programmes, an allocation of Rs2.795 trillion has been proposed. This includes Rs1.188 trillion for Punjab, Rs887 billion for Sindh, Rs440 billion for Khyber Pakhtunkhwa, and Rs280 billion for Balochistan. Development projects with international assistance are expected to receive Rs802 billion.

The government is targeting an economic growth rate of 4.2% for the next fiscal year. The agriculture sector is projected to grow by 4.5%, industry by 4.3%, and the services sector by 4%.

The Cabinet Division’s development projects are expected to receive Rs50.33 billion, while Rs50 billion have been earmarked for parliamentarians’ development schemes. Projects related to climate change are likely to receive Rs2.78 billion.

Federal budget 2025–26: Govt mulls relief package for salaried class

The government aims to set the remittances target at $39.43 billion—up from this year’s estimate of $37.45 billion. Exports for FY2025-26 are projected at $35.28 billion, compared to $32.85 billion this fiscal year, while imports are expected to exceed $65.21 billion, up from the current year’s estimate of $58.3 billion.

The current account deficit is projected to be over $2.11 billion, in contrast to a projected surplus of $1.52 billion for the ongoing fiscal year. Export of services is targeted at over $14 billion, significantly higher than this year’s estimate of $11.48 billion.