Pakistan Federal Budget 2025–26: Defence Boost, Deficit Curtailment, and Peoples’ Priorities

Pakistan Federal Budget 2025–26: Defence Boost, Deficit Curtailment, and Peoples’ Priorities

On June 10, 2025, Pakistan unveiled its federal budget for FY2025–26, amidst significant internal and regional pressures. Presented by Finance Minister Muhammad Aurangzeb in a vibrant National Assembly session, this budget marks a striking shift in fiscal strategy — a combination of austerity and strategic priorities. The goal: reduce the fiscal deficit while maintaining national security and providing limited relief to citizens.

Budget Framework & Economic Outlook

Total spending is projected at PKR 17.57 trillion, reflecting a 7% cut from the previous year. Growth is targeted at 4.2% GDP, with inflation expected around 7.5%.

Defence Allocations Surge

Defence spending has surged by 20% to PKR 2.55 trillion, justified by national security concerns and regional competition.

Revenue Targets & Tax Measures

The government aims to collect PKR 14.13 trillion in tax revenue and PKR 5.15 trillion in non-tax income. New taxes target agriculture, real estate, and digital businesses.

Deficit & Debt Servicing Cuts

The fiscal deficit target is 3.9% of GDP. Debt servicing still consumes over 45% of total expenditure, around PKR 8.2 trillion.

Social Spending & Public Relief

10% salary increases and 7% pension hikes have been approved. Allocations for education, health, and BISP remain modest but stable.

Development Projects & Infrastructure

PKR 1 trillion is allocated for PSDP, with a focus on energy projects, water infrastructure, and vocational education programs.

Opposition & Expert Reactions

Opposition parties criticized the budget for favoring elites. Analysts are divided, calling it IMF-compliant but lacking in social reform.

IMF Obligations & Future Outlook

The budget adheres to the $7 billion IMF program with structural reforms, though long-term economic stability depends on execution and political will.

Conclusion

This budget is a bold attempt to balance debt, defence, and public expectations. Whether it delivers stability or sparks dissent remains to be seen.

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🔗 Sources

• Dawn – Budget 2025–26: Austerity budget offers ‘crumbs’ for relief
• The Express Tribune – PTI tears into ‘elite-driven’ budget
• Reuters – Pakistan to slash spending, hike defence budget

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