Government to Move Ahead with Full-Year Budget Despite India Tensions
ISLAMABAD: On Friday, the government reaffirmed its plan to present a full-year budget for fiscal 2025-26, even as some advisors suggested Prime Minister Shehbaz Sharif consider a short-term budget and seek provincial support to cover rising defense costs.
During a key budget preparation meeting, participants strongly advocated allocating substantial funds for national defense in light of escalating tensions with India, particularly after India’s move to suspend the Indus Waters Treaty. They also pushed for fast-tracking the completion of the Diamer-Basha dam to secure vital water resources.
Prime Minister Shehbaz Sharif, who chaired the session attended by cabinet members and top business leaders, also directed the Federal Board of Revenue (FBR) to impose taxes on the income of Islamabad Club, an elite recreational hub frequented by bureaucrats, diplomats, and wealthy elites.
While some in the meeting proposed adopting a shorter-than-usual budget — possibly a four-month budget, as permitted under the Constitution — government officials confirmed that the plan remains to table the full-year 2025-26 budget in the first week of June.
The finance ministry has committed to ensuring ample funding to manage the current India-related conflict, proposing an 18% increase in defense allocations compared to this year’s budget.
Funding Priorities and Proposals
Participants also recommended freezing next year’s development spending at this year’s actual level, which may remain under Rs600 billion due to sluggish disbursement.
Several cabinet members emphasized prioritizing funds for the Diamer-Basha dam to speed up its completion, recognizing its importance for national water storage and resilience.
Additionally, the group underscored the need to bolster foreign exchange reserves to cover potential emergency imports during the ongoing tensions.
Private Sector Recommendations
One of Pakistan’s wealthiest business figures urged the prime minister to streamline the oversized government bureaucracy. Others in the private sector called for tax relief on textile exports and proposed suspending the Export Development Surcharge currently levied on exporters.
Another participant suggested banning economic activities by non-filers, including prohibiting their participation in grain trading.
Government’s Stated Goals
In an official statement, the Prime Minister emphasized that easing the financial burden on ordinary citizens will be a central focus of the upcoming budget. He pledged to deploy all available resources to reduce the economic hardships faced by low- and middle-income groups.
Shehbaz Sharif directed his team to craft a budget centered on sustainable, export-led growth, with a strong emphasis on initiatives that boost industrial production, create jobs, and promote key sectors such as agriculture, information technology, small and medium enterprises, and housing.
