ISLAMABAD:
Finance Minister Muhammad Aurangzeb presented the federal budget for fiscal year 2025-26, emphasising the government’s focus on economic stability and growth.
In his budget speech in the National Assembly, Aurangzeb outlined key economic achievements, saying that remittances have reached $31.2 billion, with projections to rise to $37-38 billion by the end of the fiscal year. The country’s economic growth stands at 2.7%, and inflation has decreased to 4.7%, he claimed.
The finance minister also touted improvements in Pakistan’s credit rating, with Fitch raising its rating to B- and Moody’s signalling positive changes in the economy.
In terms of fiscal policy, the government has made huge strides in tax reforms, aiming to increase the tax-to-GDP ratio, which has historically been low at 10%, according to Aurangzeb.
The introduction of digital integration between the economy and the tax system is expected to improve efficiency. He shared details of measures to combat fraud and increase tax compliance, including blocking over Rs9 billion in fake tax refunds and using AI to identify fraudulent claims involving Rs13 billion.
Simplified tax return forms for salaried people will be implemented starting July 1, 2025.
The finance minister sought to dismiss rumours regarding a mini-budget and clarified that no new taxes have been imposed.
In the power sector, electricity rates have been reduced by 38%, and inefficient power plants with a total capacity of 3,000 megawatts have been shut down. Plans to reduce electricity tariffs further are also underway.
Aurangzeb claimed that the IMF has recognised the government’s efforts to enforce laws, generating Rs389 billion in revenue. In the energy sector, losses in electricity transmission were reduced by Rs140 billion, and privatisation plans for three distribution companies have been finalised.
The finance minister emphasised ongoing efforts in the oil and gas sector, with new hydrocarbon discoveries set to strengthen energy security. Morover, the government is working to establish a competitive electricity market, with legislative action for the National Electric Power Regulatory Authority (NEPRA) expected to begin within three months.
Aurangzeb also spoke about significant progress in Pakistan’s debt management, with the debt-to-GDP ratio dropping from 72% to below 70%. The government has launched Sukuk bonds on the Pakistan Stock Exchange and is preparing to issue Panda bonds in China.
In terms of long-term economic development, the Reko Diq project, set to be completed by January 2025, is expected to generate more than $75 billion in cash flows over its 37-year lifespan and create employment for 41,500 people.
State Bank reserves are projected to reach $14 billion by the end of 2025. The finance minister also underlined that reforms in various sectors, including pharmaceuticals and IT, are expected to benefit the economy, with significant reductions in customs duties planned over the next four years.
The National Assembly session commenced under the chairmanship of Speaker Ayaz Sadiq, starting with the recitation of the Quran and followed by the traditional presentation of the Naat (praise of Prophet Muhammad, peace be upon him). Members then stood in respect to sing the national anthem.
In his address, Finance Minister Mohammad Aurangzeb, upon receiving permission from the Speaker, expressed his gratitude to Prime Minister and other political leaders for their support.
He noted that the budget was being presented under extraordinary circumstances, highlighting the remarkable unity shown by the nation. Aurangzeb stated, “The unity displayed by the nation against India will be remembered as a golden chapter in history.”
Aurangzeb went on to say that the focus now lies on achieving economic stability and growth. “We are committed to strengthening the economy and ensuring public welfare with sincerity and determination,” he added.
He also underscored that over the past year and a half, Pakistan has successfully made strides in economic reforms, stabilising the economy, and building a strong foundation for the future.
“We want to create an economy that benefits every section of society and ensures development reaches every doorstep,” he said.
The Minister also provided a detailed account of economic progress, stating that the country has seen significant growth in various sectors.
Aurangzeb further outlined the government’s achievements in increasing the Federal Board of Revenue’s (FBR) tax collection, which had previously been hindered. “We were missing out on over half of our tax potential, and filling this gap was crucial. It was impossible to improve the economy without transforming the FBR,” he remarked.
Under the supervision of Prime Minister, the government implemented a transformative plan, resulting in increased revenues. The Finance Minister mentioned that the government had successfully collected 78.4 billion rupees in taxes, overcoming significant challenges. Additionally, the Alternate Dispute Resolution (ADR) process helped recover 77 billion rupees for the national treasury.
Earlier, in a meeting chaired by Prime Minister Shehbaz Sharif, the federal cabinet approved an increase in the salaries of government employees.
According to reports, the federal cabinet also approved the budget proposals for the upcoming fiscal year.
Finance Minister Muhammad Aurangzeb briefed the cabinet on the budget during the meeting.
When asked by journalists about maintaining fiscal discipline after the budget, Muhammad Aurangzeb responded, “Inshallah.”
Sources indicated that the budget for the upcoming fiscal year may include a 6% increase in government employees’ salaries.
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On the other hand, the federal government is considering reducing taxes on five-year-old vehicles in the upcoming 2025-26 budget to make imports more affordable.
Sources reveal that the government is reviewing proposals to ease customs and regulatory duties under the National Tariff Policy.
This includes phasing out additional customs duties and cutting regulatory charges. A reform in the Customs Act’s Fifth Schedule is also being considered to remove non-tariff barriers.
The government’s strategy aims to lower the average import tariff to below 6% by 2030, while also boosting competition in the domestic auto market.
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Furthermore, the government is considering imposing excise duties on various everyday items in the upcoming 2025-26 budget, including fast foods, processed food, and beverages. The aim is to increase revenue and curb excessive consumption.
Items like chips, noodles, cold drinks, ice cream, biscuits, and frozen foods could see a 5% excise duty. Proposals also include applying an 18% sales tax on online shopping and e-commerce, bringing digital platforms into the tax net.
