Photo : Dawn
NIAS Area Studies
PAKISTAN READER
Photo : Dawn
In Focus
Pakistan Budget 2025: 4.2 per cent growth target; Defence to receive 20 per cent increase
On 10 June, Pakistan's Finance Minister Muhammad Aurangazeb released the federal budget for the fiscal year 2025-26 (FY) at the National Assembly session in Islamabad. The budget aimed to achieve GDP growth of 4.2 per cent and revealed a record tax shortfall of PKR 107 trillion. The projected revenue target for the upcoming FY is at PKR 14.13 trillion, an 18.7 per cent increase from the revised targets of the current year. The budget target for the current year was originally estimated at PKR 12.97 trillion and later revised to PKR 11.9 trillion. He revealed proposals to accelerate the 4.2 per cent economic growth in the coming fiscal year along with reduced spending and tighter tax measures.
According to The Express Tribune reported that the defence budget received a 20 per cent increase of PKR 2,550 billion towards "operations, equipment, and other needs of the Pakistan Army, Pakistan Air Force, Pakistan Navy, and related defence institutions." Additionally, the defence ministry's development budget will receive a 114 per cent rise of PKR 11.6 billion.
Benefits for salaried class and measures to mitigate brain drain
As per Dawn the new budget will benefit the salaried class, "who have been burdened by high tax rates, declining real incomes, and severe inflation over the past two years." The income tax on annual income between PKR 600,000 and PKR 1.2 million has been reduced by half, to 2.5 per cent. The income tax on earnings up to PKR 2.2 million will fall to 11 per cent, from the current 15 per cent. Salaried income between PKR 2.2 million and 3.2 million will also receive an income tax cut to 23 per cent from the present 25 per cent. Additionally, Dawn highlighted that the tax rate for the lowest taxable bracket announced by the Finance Minister contradicted the finance bill, which recorded the rate at 1 per cent. A 1 per cent reduction in surcharge on annual incomes beyond PKR 10 million has been announced as a corrective measure to mitigate the "brain drain" of skilled professionals due to "oppressive tax rates."
Government employees will receive a 10 per cent increase in salaries and a seven per cent rise in pensions. Armed forces personnel are also set to receive a 25 per cent salary hike and special relief in recognition of their services during the recent India-Pakistan conflict. (“Budget 2025-26: Austerity budget offers ‘crumbs’ for relief,” Dawn, 11 June 2025; “Budget FY26: ‘Relief’ for salaried group as govt goes after solar panels, e-commerce,” Dawn, 11 June 2025; “Defence budget hiked by 20.2% to Rs2,550b,” The Express Tribune, 11 June 2025; “Rs1tr PSDP marked by political priorities,” The Express Tribune, 11 June 2025)
Responses from experts:
Discipline without Direction: Budgeting under IMF constraints
The 2025-26 budget has elicited varied responses among financial experts who see it as more of an IMF-induced budget than a bold economic planning. Macroeconomist Sajid Amin termed it as an expected IMF - compliant budget, whereas economist Ali Hasnain appreciated its relative discipline, but condemned the absence of any meaningful reform. The selective nature of the transparency, especially the non-inclusion of percentage changes in defence expenditure cast doubt on whether the government was keen on complete disclosure.
Former chief economist of the Planning Commission, Dr. Mohammad Ahmed Zubair, criticized the budget severely as being based on fiscal austerity instead of focusing on economic recovery. He contended that in a scenario of stagnation, characterized by low growth, decreasing inflation, and increasing unemployment, Pakistan requires economic stimulus rather than another round of tightening the budget. The aim of the government to cut the fiscal deficit target of 5.6 percent to 3.9 percent and raise the primary surplus to 2.4 percent was viewed as a retreat instead of reform. Tax revenues are projected to increase by 19 percent and non-debt current expenditure will only go up by 8.5 percent. Former chief economist Zubair termed the budget as “fiscal handcuffing” and stated that unless Pakistan can deal with its debt servicing trap and make a dramatic fiscal compact, the nation will continue to be stuck in a low growth-high inequality spiral. (“Short of structural bold reforms: Finance experts unpack 2025-26 budget,” Muzhira Amin, Dawn, 11 June 2025)
Responses from opposition:
Imran Khan calls for a nationwide protest against the national budget
On 11 June, The News International reported that former Prime Minister Imran Khan had condemned the forthcoming national budget. He stated that this budget will disproportionately burden Pakistan’s salaried class and farmers. His sisters, Aleema Khan and Noreen Khan, have spoken to the media after meeting with their brother. Imran Khan reportedly declared, “I am still the party head, and without my consultation, no budget allocation can be finalized.” She added that the PTI-led government in Khyber Pakhtunkhwa is preparing to present a tax-free budget. Imran Khan has instructed the Khyber Pakhtunkhwa Chief Minister, Ali Amin Gandapur, to allow the party’s economic team to be consulted on the federal budget, and the IMF’s condition is to consult with the PTI as the opposition. Imran Khan has also stated a strong political charge, urging his supporters to mobilize the entire nation to prepare for a protest movement as he believes the rule of law is buried following the 26th Constitutional Amendment Act, as the nation's finances are at the heart of the conflict. He has added that his imprisonment is a sacrifice for the rights of the people. In addition to that, the family has unveiled the alleged pressure exerted on the PTI chairman to accept the deal that would see him negotiate for his freedom in exchange for silence on public issues and legitimizing a government formed with a mere 17 seats, and they have raised concerns about the treatment of Imran Khan in Jail. (“Imran slams budget, calls for nationwide protest against govt’s economic policies” Shakeel Anjum, The News International, 11 June 2025)
Responses from business community:
Business groups express disappointment over the budget
On 11 June, The Express Tribune reported that the budget consists of announcements regarding digitalisation to promote a cashless economy. Addressing the press at Karachi Chamber of Commerce and Industry after the budget speech on 10 June by the finance minister, Businessmen Group (BMG) Chairmen Zubair Motiwala criticised the budget. He said the budget was a “camouflage” as it did not provide any necessary aid for the business community or the common man. He expressed that it has infeasible objectives. Zubair questioned the plans to achieve these goals in an economic environment that is ambiguous due to high inflation and constraints by the IMF. He expressed that the government is not expanding the tax base to increase revenue rather burdens the existing payers. The Overseas Investors Chambers of Commerce and Industry (OICCI) expressed disappointment in the inequitable corporate tax rates. According to the budget speech Small and Medium Enterprises Development Authority has a three-year business development plan. ( Gohar Ali Khan, “Businessmen air concern over budget measures”, The Express Tribune, 11 June 2025)
Responses from print media
“There is not much in the budget to give hope for a structural shift,” criticized an editorial in Dawn
On 11 June, an editorial in Dawn titled “Ambitious goals” stated that the budget announced for the financial year 2025-26 on 10 June aims to strengthen fiscal consolidation. The editorial highlighted it to be a path for a successful second review of the USD 7 billion IMF programme. The national fiscal deficit target originally was 5.9 per cent of GDP, which has been reduced to 3.9 per cent, the editorial highlighted. The editorial highlighted that the provinces have been criticised for adding a burden to federal finance because of their increased shares through the NFC award, which will now contribute a surplus of nearly PKR 1.5 trillion. It also criticized that the budget is a disappointment for those who expected structural reforms for sustainable growth. The budget has hopes on long-standing tariff reforms to end protection in industries in the next five years. The editorial highlighted that the budget is to set thresholds on purchases to bring non-filers into account. It further criticized Finance Minister did not address issues regarding the inequitable corporate tax rate, but the controversial super tax was reduced. (“Ambitious goals”, Dawn, 11 June 2025)
“Biggest winners are those making up to PKR 2.2 million with minimum rates reduced by 4 per cent” stated an editorial in The News International
On 11 June, an editorial titled “Budget 2025-26” in The News International stated that many were uncertain about the government's ability to provide relief to salaried classes while making slashes on expenditure and raising revenue. The editorial highlighted that the FBR tax revenues are to increase by PKR 14,131 billion and that the overall federal expenditure has been cut down by 7.9 per cent. The editorial stated that the budget includes substantial tax reliefs for most of the Pakistani taxpayers. The editorial highlighted that the defence expenditure in the budget increased by 18 per cent. The editorial stated that the government aims to collect more direct taxes in this fiscal year, about PKR 6.9 trillion versus PKR 5.8 trillion the previous year. It further stated that Solar panels will be taxed at 18 per cent henceforth.The inflation target for the year has raised to 7.5 per cent, highlighted the editorial. The editorial highlighted that the budget is to be export-oriented. The editorial underscored that the budget achieves the IMF guidelines for primary surplus of 2.4 per cent and that the government is critical of reforms and has brought in new measures in freelancing and online work. (“Budget 2025-26”, The News International, 11 June 2025)
In Brief
SOCIETY
Aseefa Bhutto Zardari voices distress over Tik Tok influencer Sana Yousaf’s murder
On 11 June, The Express Tribune reported on the condemnation expressed by Member of National Assembly and daughter of President Asif Ali Zardari, Aseefa Bhutto Zardari, against the murder of Tik Tok influencer Sana Yousaf. Aseefa Zardari claimed “what happened to her wasn’t just an act of violence- it was a punishment for saying no.” Aseefa emphasized how the incident highlighted “male entitlement” and asserted that the same must not be seen as a part of “cultural or traditional values.” She pointed out how in Pakistani society, people see dismissal by a woman as a big humiliation. She expressed concerns regarding the spread of the narrative that Sana herself is responsible for her death, owing to her presence on social media. She urged the woman community to not bog down and fight back instead against repression.
(“Aseefa condemns Sana's murder,” The Express Tribune, 11 June 2025)
On the problem of drug-intake among youth:
“Piecemeal measures and reactive policies won’t save our children” says an editorial in The News International
On 11 June, an editorial in The News International, discussed the increase in intake of drugs among the young population of Pakistan. The editorial highlighted how close to one crore 70 lakh students who fall in the age category 18-31 are involved in intake of drugs. The editorial points out that every year, the concerned authorities come up with disturbing numbers regarding the increase in intake of drugs, however, no concrete steps have been taken up until now. The editorial appreciates the recent efforts put in by Senator Irfanul Haque Siddiqui, emphasizing on “child protection and drug-free schools.” The editorial suggests that the educational institutes must hire qualified “counsellors” who have experience in dealing with teenagers. The counsellors could help out the students who might be undergoing stress and discourage drug-intake to those who see it as a way to deal with their problems. The editorial calls for concrete measures to fight the problem of drug-intake that must emphasize upon “education, mental health support” and strengthening the laws.
(“The curse,” The News International, 11 June 2025)
JUDICIARY
Islamabad High Court Special Division Benches resolves tax disputes worth PKR 600 Billion
On 11 June, The Express Tribune reported that the Islamabad High Court (IHC) had disposed of cases worth more than PKR 600 billion, and the stay order had been lifted in the last two months. To achieve a substantial increase in the revenue recovery efforts. A special division bench composed of Justice Muhammad Azam Khan and Justice Inaam Ameen Minhas was formed on the directives of Acting Chief Justice Sarfraz Dogar to dispose of tax and revenue cases speedily. On 10 June a report claimed that they disposed of tax cases worth PKR 424 billion. Moreover, Justice Babar Sattar and Justice Sardar Ejaz Ishaq Khan disposed of 94 cases worth PKR 150 billion for the tax recovery. In the PKR 36 billion tax recovery cases, Chief Justice Sarfaraz Dogar and Justice Inaam Ameen Minhas lifted the stay order. The bench had delivered the verdict and disposed of 173 tax cases within two months. (IHC disposes of tax cases worth Rs600b,” The Express Tribune, 11 June 2025)
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