Finance Minister Muhammad Aurangzeb on Tuesday unveiled Pakistan’s annual federal budget in a charged National Assembly session, outlining ambitious proposals to drive 4.2 per cent economic growth in the coming fiscal year while cutting back on overall spending and tightening tax measures.

As the session — chaired by NA Speaker Sardar Ayaz Sadiq — commenced, opposition lawmakers erupted into anti-government slogans.

Starting his speech, the finance minister said the budget 2025-26 was being presented at a “historic moment” marked by national unity and resolve, referencing the recent Pakistan-India conflict.

“The spirit with which we protected our national sovereignty, we need to ensure our financial security the same way,” he maintained, continuing his speech through the noisy session.

“Pakistan has now achieved economic stability and is moving towards a Pakistan that is prosperous.”

The federal budget for fiscal year 2026 has a total outlay — the sum of expenditures and net lending of funds — of Rs17.573 trillion, representing a 6.9 per cent decrease from the previous year’s budget.

The government has proposed Rs16,286bn for current expenditure in the FY26 budget, a 5.33pc decrease from the previous year.

Interest payments, or debt servicing, have contracted by 16 per cent to Rs8,207bn, yet continue to consume almost half of the total budget outlay and becoming, like in the last few years, the government’s single largest expense.

Defence expenditure constitutes Rs2,550bn, 20.2pc higher than last year’s budget, making up 1.97pc of GDP, an increase from last year’s 1.71pc.

Expanding on the defence budget later during his speech, Aurangzeb stated that officers and junior-commissioned officers would get a special relief allowance from the budget “in light of the contribution of the armed forces to defending our borders”.

Aurangzeb said that it was unavoidable to aim for a 14pc tax-to-GDP ratio and added that achieving the national targets was “impossible without the transformation of the Federal Board of Revenue (FBR).”

The government has set an ambitious tax collection target for the FBR at Rs14,131bn, a 9pc increase from last year’s goal.

Detailing that transformation, the minister listed B2B e-voicing, AI-based audit selection systems for sales and income tax, e-billing and faceless audits, and a new central control unit to centralise data collection, among other steps.

Expanding upon the results, he said 390,000 high-value non-filers of tax were identified through data integration, with Rs300m recovered. The minister further highlighted that there was a 100pc increase in the number of tax filers, which took the revenue to Rs105bn.

“For the first time, the IMF (International Monetary Fund) has acknowledged Rs389bn revenues through law enforcement,” he said.

Speaking on tax revenues, he said the tax-to-GDP ratio was only 8.8pc in June 2024, which was raised to 10.3pc in the first nine months of FY2025, and would reach 10.4pc by the end of June.

The government’s revenue was now at 11.6pc, including the provinces’ 0.8pc contributions.

“The FBR has increased tax-to-GDP ratio by 1.6pc, which is historic not just in Pakistan but the world,” he asserted.

Aurangzeb also announced tax relief measures for the salaried class, stating that the government planned to reduce the tax slabs, “balancing inflation and take-home [income]”.

Those earning between Rs0.6m and Rs1.2m would pay a 2.5pc tax, those with income greater than Rs1.2m and less than Rs2.5m would pay an 11pc tax, with those earning above that and till Rs3.2m would need to pay a 23pc tax.

For the corporate sector, the minister said it was being proposed to reduce the super tax rate for corporations earning between Rs200m-Rs500m annually to 5pc.

The finance minister proposed that Balochistan and the merged districts in KP, which “had a leeway with taxes for the past seven years”, were now to pay sales tax starting from 10pc for five years.

He said an 18pc tax would be applied on imported solar panels, while online businesses and digital marketplaces would also come under the tax........

© Dawn Business