Pakistan to present federal budget with proposed PKR 6.5 trillion deficit

Pakistan will unveil its federal budget for fiscal year 2025-26 on Tuesday evening, projecting a fiscal deficit of PKR 6.5 trillion amid an expected budget outlay of PKR 17.6 trillion, according to sources at the Ministry of Finance.

The government is targeting a PKR 14.1 trillion tax revenue collection, representing a 15% increase from the previous year. Officials attribute the anticipated growth to improved economic activity and higher commodity prices.

However, despite higher revenue projections, the fiscal deficit will remain steep due to substantial transfers to provinces under the National Finance Commission (NFC) Award. Roughly 57.5% of FBR’s tax collection, or PKR 8.1 trillion, will be transferred to provinces, leaving the federal government with just over PKR 6 trillion to cover its own expenditures.

Non-tax revenue is projected at PKR 5.2 trillion.

Major expenditures

• Debt servicing remains the government’s largest expense at PKR 8.5 trillion, consuming around 60% of total revenue.
• Subsidies: PKR 1.3 trillion
• Civil government operations: PKR 720 billion
• Pensions: PKR 975 billion
• Defense expenditure: Yet to be disclosed

Economic and trade projections

• Current account deficit set at $2.1 billion or 0.5% of GDP
• Export target: $35.3 billion
• Import target: $65.2 billion
• Remittances target: $39.4 billion

Key budget initiatives likely to be proposed

• PKR 2.5 billion to be allocated to establish 1,000 industrial stitching units
• Reintroduction of the Laptop Scheme and launch of the Pakistan-Bangladesh Friendship Scholarship Program
• Electricity transmission improvements planned for 15,352 villages, with capacity expansion of 2,800 MW, including 2,633 MW in solar net metering
• Continued work on major transport projects like ML-1 railway and Karachi Circular Railway
• Launch of Arshad Nadeem/Shehbaz Sharif High-Performance Sports Academy
• Infrastructure funding for Azad Jammu & Kashmir, Gilgit-Baltistan, and merged districts

Finance Minister Muhammad Aurangzeb is expected to outline these measures in detail during his budget speech, highlighting the government’s fiscal priorities, development agenda, and steps to manage economic challenges in FY2025-26.