Finance Minister Muhammad Aurangzeb formally presented the federal budget for fiscal year 2025–26 in a much anticipated session on Tuesday, setting the outlay at Rs17.573 trillion. According to reports, the announcement was made during a National Assembly session presided by Speaker Ayaz Sadiq, which commenced late in the afternoon.

Aurangzeb laid Finance Bill 2025 before the House along with detailed revenue and budgetary documents. Government expenditure for the incoming fiscal year (FY) 2025-26 stands lower than last FY’s outlay of Rs18.78 trillion. Details from reports suggest that the Federal Board of revenue is responsible for revenue collections amounting to a staggering Rs14.131 trillion. 

The new revenue target is being dubbed as ambitious as the revised revenue target for the outgoing FY stands at just Rs12.33 trillion. However, key officials have conceded that the FBR may remain unable to meet the revised target before the start of FY 2025-26. 

 

Government pay and pensions have witnessed a hike of 10 percent. Prior to the release of the budget, the Ministry of Finance (MoF) tabled four proposals on pay and pension hikes which ranged from five to 12.5 percent.

Initial reports suggest that the final decision was likely to lean toward a raise between 7.5 to 10 percent for government employees, with a 30 percent Disparity Allowance expected for those in grades 1 to 16. The hike in pay and pensions is in line with the higher end of the projections.

Analysts have outlined how the hike in salaries is higher than the rate of inflation in the economy. Inflation rates have remained subdued, largely because of the State Bank of Pakistan’s goal to rein in inflation.

The overall revenue framework sees the FBR’s Rs14.131 trillion goal supported by a projected non-tax revenue collection of Rs5.147 trillion.
Mark-up payments on debt obligations remain a dominant portion of federal spending as they have been budgeted at Rs8.207 trillion. This marks a steep decline from Rs9.7 trillion the year before. Defence allocations have increased by 18 percent, standing at Rs2.55 trillion. Analysts believe one factor behind the hike is India’s unwarranted belligerence against Pakistan. 

Pension payments for FY 2025-26 will stand at Rs1.05 trillion. Subsidies and grants have been pitched at Rs1.186 trillion and Rs1.9 trillion respectively.

On the development side, the federal Public Sector Development Programme (PSDP) has been slashed, standing at just Rs1 trillion. Total federal expenditures for the fiscal year have been pegged at Rs17.573 trillion, of which Rs16.286 trillion constitutes current spending.

It merits a mention that the federal government intended to announce the budget earlier, however authorities chose to delay the announcement instead as discussions, in late May, between Islamabad and the IMF remained inconclusive.