Finance Minister Clarifies No Mini-Budget or New Taxes Introduced
ISLAMABAD:
Finance Minister Muhammad Aurangzeb unveiled the federal budget for FY2025-26 on Tuesday, underlining a commitment to economic stability and growth while denying speculation about any mid-year mini-budget or new tax impositions.
Delivering his budget speech in the National Assembly, Aurangzeb highlighted economic indicators showing improvement: remittances have reached $31.2 billion with projections of $37–38 billion by fiscal year-end, GDP growth stands at 2.7%, and inflation has dropped to 4.7%.
He pointed to upgrades in Pakistan’s credit profile, noting Fitch’s rating improvement to B- and a more optimistic outlook from Moody’s. He also spotlighted tax reforms aimed at raising the historically low 10% tax-to-GDP ratio. Key measures include digital integration of the tax system, AI-powered fraud detection—which has flagged Rs13 billion in fraudulent claims—and Rs9 billion in blocked fake refunds.
Starting July 1, 2025, salaried individuals will benefit from simplified tax return forms.
Aurangzeb assured the public that no new taxes have been introduced and dismissed rumours of a supplementary budget.
In the energy sector, the minister reported a 38% drop in electricity prices and the closure of inefficient power plants totaling 3,000 MW. He added that reforms have reduced transmission losses by Rs140 billion and that privatisation plans for three power distribution companies are moving ahead. Legislative work to develop a competitive power market through NEPRA reforms is expected to begin within three months.
The government has also made strides in debt management, bringing the debt-to-GDP ratio below 70%. New financial instruments include Sukuk bonds launched on the Pakistan Stock Exchange and planned issuance of Panda bonds in China.
Aurangzeb cited major progress in strategic projects, including the Reko Diq mine, set to begin operations by January 2025. The project is expected to generate over $75 billion in revenue across 37 years and provide employment to more than 41,000 people.
Foreign exchange reserves are projected to rise to $14 billion by the end of 2025, and reforms in sectors such as pharmaceuticals and IT are expected to further stimulate growth. The government also plans phased reductions in customs duties over the next four years to support these industries.
The budget session began under Speaker Ayaz Sadiq, with Quranic recitation, a Naat, and the national anthem. In his remarks, Aurangzeb thanked Prime Minister Shehbaz Sharif and coalition leaders for their support, stressing that the budget was being presented in exceptional circumstances.
He noted the unity shown in response to recent tensions with India, calling it a historic moment. “The nation’s solidarity will be remembered as a golden chapter,” he said.
Aurangzeb reiterated that the government’s priority remains sustainable economic development, equitable growth, and public welfare. Over the past 18 months, he claimed, Pakistan has achieved significant macroeconomic stability and laid a strong foundation for future progress.
“Our aim is to create an inclusive economy that uplifts every segment of society,” he stated.
He also addressed improvements in FBR revenue collection, previously marred by inefficiencies. The FBR, he said, has collected Rs78.4 billion in taxes, with an additional Rs77 billion recovered through the Alternate Dispute Resolution mechanism. He acknowledged that Pakistan had been missing out on more than half of its tax potential and that comprehensive FBR reform was key to turning this around.
Earlier, Prime Minister Shehbaz Sharif chaired a federal cabinet meeting where the 2025-26 budget was approved. The cabinet also approved a 10% salary increase for government employees and a 7% pension hike.
When asked about fiscal discipline post-budget, Aurangzeb responded with confidence: “Inshallah.”
Meanwhile, the government is considering easing import costs by reducing duties on five-year-old vehicles and phasing out certain regulatory charges under the National Tariff Policy. Reforms to the Fifth Schedule of the Customs Act are also under review to eliminate non-tariff barriers, aiming to reduce the average import tariff to under 6% by 2030.
In an effort to expand the tax base, excise duties may be levied on processed and fast foods—such as chips, noodles, soft drinks, ice cream, and biscuits—with a proposed 5% tax. An 18% sales tax on e-commerce is also under consideration to bring digital platforms into the formal tax net.
