The budget 2025-26 makes one implicit and three explicit assumptions that enable its architects to present a set of expenditure and revenue targets in support of Finance Minister Muhammad Aurangzeb’s claim that it would fundamentally change the DNA of the economy through the creation of a competitive economy on the back of a rise in productivity that, in turn, would increase exports. The question is if these assumptions are realistic.

The implicit assumption is a further reduction in the discount rate after the meeting of the Monetary Policy Committee scheduled today (16 June 2025) to justify the 739 billion rupees budgeted reduction under the head of mark-up next fiscal year. This reduction is notwithstanding the government’s intent gleaned from the budget documents to: (i) increase non-bank borrowing from the budgeted 2.662 trillion rupees in 2024-25 to 2.874 trillion rupees next year though the budget acknowledges a reduction of 23.658 billion rupees on account of National Savings Schemes – from 164,994 million rupees in 2024-25 to a projection of 141,288 million rupees next year; and (ii) bank borrowing (T-bills, Pakistan Investment Bonds, sukuk) or debt equity budgeted to generate 3.435 trillion rupees in 2025-26 against 5.142 trillion rupees budgeted for 2024-25 – a claim that is not in synch with the details provided for capital receipts budgeted to rise to 2663.9 billion rupees in 2025-26 against only 326 billion rupees in the current year with floating debt budgeted to rise to 1.409 trillion rupees in 2025-26 against 1.121 trillion rupees in the current year.

In this context, it is relevant to note that the Finance Minister on several private television channels post the budget speech expressed a pledge to raise debt equity (which remains stymied due to the country’s low rating by the three international agencies) and the issuance of a Panda bond at however low the total, or so he stated. Needless to add, any reduction in........

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