ISLAMABAD (Mudassar Ali Rana) – The government is set to introduce strict fiscal measures in the upcoming federal budget for FY2026–27, with a strong focus on curbing public expenditure and improving revenue collection, sources in the Ministry of Finance said.
Officials indicated that key proposals include broadening the tax base, reducing sales tax exemptions, and cutting non-essential spending to strengthen fiscal discipline. The Federal Board of Revenue (FBR) is expected to set a tax collection target of around Rs15.5 trillion, as the government aims to raise the tax-to-GDP ratio and bring public debt closer to 70 percent of GDP in line with consultations with the International Monetary Fund.
Authorities also stressed the need for timely fuel price adjustments to avoid additional fiscal pressure, particularly amid regional tensions affecting global energy markets. The IMF has projected Pakistan’s medium-term growth at around 5.5 percent, contingent on continued reforms and stable global conditions.
Inflation remains a major concern, with rising energy and food prices expected to push overall inflation above targets, despite relatively stable core inflation. Economic indicators for FY2025 –26 show mixed performance, with strong growth in sectors such as automobiles, construction, and textiles, but increasing risks from higher global oil prices linked to Middle East tensions.
The government has set a primary surplus target of 1.6 percent of GDP for the current fiscal year. Although the FBR missed its revenue targets, the shortfall was partially offset through higher petroleum levy collections, improved provincial revenues, and spending cuts. Additional measures, including recovery of pending taxes following court rulings, are expected to generate around Rs322 billion.
Further steps under consideration include reducing subsidies, enhancing efficiency in public finances, and limiting discretionary spending. Temporary relief measures, such as delaying fuel price increases, have been used to ease public pressure but are not considered sustainable.
Officials warned that external risks — including geopolitical tensions, global economic uncertainty, and potential disruptions in oil supply — continue to pose challenges. The government maintains that structural reforms, tax system improvements, and a more business-friendly environment will be essential for sustainable growth, alongside closer coordination with provincial governments.
The upcoming budget is expected to balance economic stability with growth, combining reform-driven policies with necessary fiscal tightening.