ISLAMABAD: Pakistan’s upcoming federal budget for the fiscal year 2025–26 is expected to exceed PKR 17.6 trillion, with the Federal Board of Revenue (FBR) set a tax collection target of PKR 14,307 billion.
Official documents indicate that budget negotiations with the International Monetary Fund (IMF) have advanced, leading to the establishment of major fiscal benchmarks. The FBR aims to gather PKR 6,470 billion from direct taxes, PKR 4,943 billion through sales tax, PKR 1,741 billion from customs duties, and PKR 1,153 billion via federal excise duties.
Additionally, the petroleum levy is projected to generate PKR 1,311 billion, while non-tax revenues are estimated at PKR 2,584 billion. A provincial surplus of PKR 1,220 billion will support efforts to reduce the fiscal deficit to 5.9% of GDP, compared to 7.4% in the current year.
On the expenditure side, debt servicing remains the largest allocation, amounting to PKR 8,685 billion, followed by PKR 2,414 billion for defense. Development spending under the Public Sector Development Programme (PSDP) is planned at PKR 1,065 billion. To bridge the fiscal gap, borrowing needs are projected at PKR 6,588 billion.
The budget underscores Pakistan’s adherence to IMF-backed economic reforms, particularly efforts to raise the tax-to-GDP ratio from 9.5% to 10.4% to support fiscal consolidation.
In discussions with provincial governments, the IMF advised phasing out federal development funding and encouraging provinces to raise their own revenues—specifically through agricultural income tax on earnings above PKR 600,000 annually, starting July 1, 2025.
