Finance minister presents Budget 2026-27

Finance Minister Muhammad Aurangzeb started his budget speech while describing Operation Bunyan-un-Marsoos as a bright chapter in Pakistan’s history, saying that last year India was given a strong and decisive response. He said the world is now recognising Pakistan’s defence capabilities, adding that several countries have shown interest in incorporating Pakistani fighter jets into their air forces.

Aurangzeb also highlighted Pakistan–Saudi Arabia defence cooperation, noting that fraternal ties between the two countries have further strengthened through defence agreements. He said the nation carries a “sacred and heavy responsibility” on its shoulders.

According to budget documents, the total outlay for the upcoming fiscal year has been proposed at Rs18,771 billion. Interest payments on debt have been allocated Rs8,054 billion, while Rs1,169 billion has been earmarked for pensions.

Budget Speech 2026-27 Re by Farhan Nazir

Military pensions are estimated at Rs822 billion and civil pensions at Rs272 billion. Defence expenditure is proposed at Rs3,000 billion, while subsidies are set at Rs1,091 billion.

Federal civil expenditure stands at Rs1,071 billion, and Rs430 billion has been proposed for emergency and unforeseen contingencies. Total current expenditure is estimated at Rs17,495 billion.

For the Public Sector Development Programme (PSDP), Rs1,050 billion has been allocated, while the Federal Board of Revenue (FBR) tax collection target has been set at Rs15,264 billion.

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PM Shehbaz engages with coalition partners

Prime Minister Shehbaz Sharif engaged with coalition partners ahead of the budget presentation, including a meeting with an MQM-P delegation at Parliament House. He described MQM-P as an important allied party and appreciated its role in supporting the government’s development agenda, economic stability efforts and public welfare initiatives. The prime minister’s consultations came as the ruling coalition moved forward with the budget process amid political negotiations with its allies.

Bilawal Bhutto-Zardari finally attends the budget session

PPP Chairperson Bilawal Bhutto-Zardari attended the budget session despite the party initially announcing that he would skip it. The party clarified it was not boycotting the proceedings, saying some members would participate in the budget process in the national interest. Before the presentation, PPP lawmakers staged a protest over Sindh’s water shortage, demanding the province receive its due share. The party had also held discussions with the PML-N leadership to resolve budget-related concerns.

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Income tax reduced, super tax revised, and surcharge abolished

The government has proposed tax relief for salaried individuals across four income slabs as part of the federal budget.

According to Finance Minister Muhammad Aurangzeb, the income tax rate for those earning Rs2.2 million to Rs3.2 million annually will be reduced to 20 percent.

For incomes between Rs3.2 million and Rs4.1 million, the rate is proposed at 25%. Those earning Rs4.1 million to Rs5.6 million will see the rate lowered to 29%, while the Rs5.6 million to Rs7 million slab will be taxed at 32%.

The finance minister also announced the removal of a 9% surcharge on the salaried class. He further proposed abolishing super tax across six slabs for incomes between Rs150 million and Rs5 billion, while reducing the rate from 10% to 8% for incomes above Rs5 billion. However, the surcharge will remain in place for banks, oil and gas exploration companies, and fertiliser firms.

For small businesses, a fixed tax regime is proposed for retailers with annual sales below Rs200 million. They would pay 1% tax on annual sales, with a minimum payment of Rs25,000 at the time of filing. These retailers would be exempt from routine audits, withholding tax obligations on purchases, and POS machine requirements.

The budget also proposes reductions in property-related withholding taxes. For filers, the rate on property purchases would be cut from 2.5% to 1.25%, while for non-filers, tax on property sales would be reduced from 5.5%to 2.75%.

On exports, the government plans to reduce the combined advance income tax and minimum tax burden from 2% to 1.25%.

Additionally, withholding tax on international debit and credit card usage is proposed at 0.5%, while capital value tax on foreign assets would be abolished, aimed at encouraging disclosure of overseas holdings.

Inflation for FY2026–27 has been projected at 8.2% in the federal budget, indicating expectations of continued price stability within a moderate range.

7% salary and pension hike, 10% minimum wage increase

The government has proposed a 7% increase in the salaries of federal government employees, according to the Finance Minister. A similar 7% hike has also been proposed for the pensions of retired employees.

In addition, the minimum monthly wage has been proposed to be increased by 10%, as part of broader measures aimed at providing relief to lower-income workers and pensioners.

Pakistan sets 4% growth, 8.2% inflation outlook for next fiscal year

Finance Minister Muhammad Aurangzeb has outlined Pakistan’s macroeconomic targets for the next fiscal year, projecting economic growth at 4 percent and average inflation at 8.2 percent.

He announced that the Federal Board of Revenue (FBR) has been assigned a tax collection target of Rs15,264 billion, while non-tax revenue is projected at Rs5,336 billion.

According to the finance minister, the federal government’s net revenue is estimated at Rs11,751 billion, whereas provinces are expected to receive Rs8,848 billion as their share of federal revenues.