Economist
At the beginning of June, public attention turns toward the budget for the new fiscal year. The budget is essentially a financial plan that estimates all expenditures and total revenue for the upcoming fiscal year. It also outlines how the revenue will be allocated to various national sectors.
This year, the federal budget of Pakistan was scheduled to be presented on June 2, but approval couldn't be obtained due to some key issues not being finalized with the IMF. As a result, the new fiscal budget was presented with a delay on June 10, 2025, by Finance Minister Muhammad Aurangzeb in a meeting presided over by National Assembly Speaker Ayaz Sadiq and in the presence of House Leader Mian Muhammad Shehbaz Sharif. As usual, the opposition continued it's protest but the Finance Minister delivered his budget speech and then departed.
Has the public truly received relief in this budget, or have they merely been pacified with figures? Let’s examine.
The Finance Minister presented a budget with a total outlay of Rs. 17,573 billion for Pakistan’s fiscal year 2025–26. The target for gross federal revenue has been set at Rs. 19,298 billion. The net federal revenue is estimated at Rs. 11,072 billion, resulting in a budget deficit of Rs. 6,501 billion, which is 5% of the total GDP.
The FBR’s tax collection target has been set at Rs. 14,130 billion, while the non-tax revenue target is Rs. 5,167 billion. Nearly more than half of the budget, amounting to Rs. 8,207 billion, has been allocated for debt repayments and interest payments.
The salaried and pensioner classes, currently under immense pressure due to inflation, had pinned high hopes on the budget. They have been granted some relief in the form of a 10% increase in the salaries of federal employees. As for pensions, the increase has been linked to the Consumer Price Index (CPI)—that is, the inflation rate. In the budget estimates, inflation has been projected at 7.5%.
This raises an important question: Is the actual inflation rate truly 7.5%? Ground realities suggest it is significantly higher. The figures presented in the budget do not align with the situation on the ground. A 7% increase in pensions appears extremely inadequate.
Furthermore, new pension reforms have also been introduced. According to these reforms, the family pension will now be limited to 10 years after the pensioner’s death, and early retirement will be discouraged—a stringent decision. Meanwhile, the elimination of multiple pensions and the requirement for retirees to choose between salary and pension is a fiscally prudent step for the national treasury.
When discussing salary increments, a 10% raise for federal employees seems grossly inadequate, particularly amid soaring inflation. Even more troubling is the absence of any increase in the minimum wage—a decision that has sparked widespread concern. The justification offered is to provide relief to the industrial sector. But what kind of relief is this, if it comes at the direct expense of the country’s most vulnerable workers?
Ironically, the same legislative house where this budget was presented—under the leadership of the Honourable Speaker—recently approved a staggering 600% increase in the salaries of both the Speaker and the Chairman of the Senate, raising their monthly pay from Rs. 200,000 to Rs. 1.3 million.
This raises critical questions:
Is inflation a burden only for those in positions of power.?
Are significant salary hikes justified only for the political elite.?
Are government employees and pensioners expected to endure with patience and quiet acceptance.?
Or is sacrifice always demanded solely from the lower and middle-income segments of society.?
The Finance Minister remarked, "It’s easy to talk about infrastructural reforms—implementing them is the real challenge." In line with IMF directives, the development budget has been reduced to Rs. 1,000 billion. Notably, only Rs. 1 billion has been allocated for new Higher Education Commission (HEC) development projects, while Rs. 70 billion has been earmarked for the development schemes of Members of Parliament.
While infrastructural reforms may be difficult, they are nonetheless essential. Sustainable economic growth is achievable only when the country's infrastructure is adequately developed and maintained.
Each year, significant funds are allocated to parliamentarians for development schemes. Naturally, one would expect to see tangible improvements in return. Yet the critical question persists: Where do these funds actually go? And why is the the infrastructure not improving accordingly.?
When it comes to healthcare, Rs. 14.3 billion has been allocated, designated for ongoing joint projects under the Public Sector Development Programme (PSDP). However, no new health projects or programs have been initiated.
Education and health are among the most vital sectors of any country. It is essential not only to launch new initiatives for their development and improvement but also to ensure the timely completion of ongoing projects.
Regarding taxes, the tax burden has been increased, with over Rs. 600 billion in new taxes imposed. Direct taxes amounting to Rs. 312 billion will be implemented.
An 18% import tax on solar panels, 25% on mobile phones, 5% excise duty on frozen items like chips, ice cream, and cold drinks, and an 18% tax on e-commerce have been introduced. Additionally, the levy on petrol has been increased by Rs. 2.50 per liter, and electricity surcharges are also proposed to be increased. The increase in General Sales Tax (GST) will burden the middle and lower classes.
While there is talk of boosting industrial growth , these new taxes on energy and fuel will drive up prices. When electricity and petrol become more expensive for industries, it is inevitable that production costs will rise, ultimately leading to higher inflation.
The government has increased the withholding tax rate on Profit on Debt, including returns on bank deposits and savings certificates, from 15% to 20%. Additionally, it is proposed to introduce an Artificial Intelligence Audit Selection System for income tax and sales tax purposes.
The tax rate on cash withdrawals exceeding Rs. 50,000 has been increased from 0.6% to 1%, making daily financial transactions more costly.
The 2025-26 budget targets 4.5% agricultural growth, but increases GST on farm machinery, seeds, and fertilizers.
Moreover, it lacks essential reforms, such as curbs on converting fertile farmland into residential colonies, which are critical for the sector's sustainability.
With these factors in place, achieving this target seems difficult.
Pakistan faces a dire situation of inflation coupled with soaring unemployment among educated and skilled youth, driving brain drain. According to a report, around 727,000 individuals, including 200,000 skilled professionals, left the country in 2024. However, the budget lacks proposals to absorb the educated workforce and fails to outline a plan to curb brain drain.
A review of the entire budget and reports from the statistics institution reveal that taxes have been imposed on almost all essential items, making them unaffordable for the general public, particularly the middle class. Given the prevailing inflation, the masses, especially salaried and pensioner classes, have not received adequate relief.