Debt servicing, defence dominate FY26-27 Budget, outlay reaches Rs18.77tr

June 12, 2026 (MLN): The federal government’s proposed fiscal framework for FY2026-27 outlines a total outlay of Rs18.771 trillion alongside significant allocations toward debt servicing, defence, subsidies, and development spending, according to Budget documents.

According to the documents, the government has earmarked a dominant Rs8.054tr for debt servicing and interest payments, underscoring continued fiscal pressure from the country’s rising debt burden.

Pension expenditures are projected at Rs1.169tr, while the defence budget has been set at Rs3tr for the upcoming fiscal year.

In addition, Rs1.071tr has been allocated for administrative affairs of defence services, reflecting the broader cost structure of national security spending.

On the revenue side, the Federal Board of Revenue (FBR) has been assigned an ambitious tax collection target of PKR 15.264 trillion, while non-tax revenue generation is projected at Rs5.336tr. The government also expects Rs4.012tr in privatisation proceeds during FY26-27, according to the documents.

Meanwhile, subsidies have been budgeted at Rs1.091tr, and the size of the federal Public Sector Development Programme (PSDP) has been set at Rs1tr, indicating a restrained development outlay relative to overall expenditures.

The figures suggest a continued tilt of fiscal resources toward debt servicing and defence, with limited fiscal space for development spending, as the government navigates tight macroeconomic conditions.

On the resource side, the government expects tax revenue of Rs15.264tr from the Federal Board of Revenue (FBR), while non-tax revenue is projected at Rs5.336tr, taking gross revenue receipts to Rs20.6 trillion.

After transferring Rs8.848 trillion to provinces, the net revenue receipts stand at Rs11.751 trillion.

Additional financing will come through multiple channels, including bank borrowing of Rs4.012 trillion, non-bank borrowing of Rs2.034 trillion, net external receipts of Rs813 billion, and privatisation proceeds of Rs161 billion, bringing total additional resources to Rs7.02 trillion.

On the expenditure side, current spending dominates the budget at Rs17.495 trillion, reflecting Pakistan’s heavy structural costs.

The largest burden remains interest payments at Rs8.054 trillion, followed by defence allocations of Rs3 trillion, pensions at Rs1.169 trillion, subsidies worth Rs1.091 trillion, and running of civil government expenses of Rs1.071 trillion.

The government has also set aside Rs430 billion for emergencies and other contingencies.

For development spending, the government has allocated Rs1.276 trillion, including Rs1 trillion for the Federal PSDP, while net lending is projected at Rs276 billion.

Overall, both total resources and total expenditures are balanced at Rs18.771 trillion, indicating a tightly structured fiscal framework for the upcoming year, with continued reliance on borrowing and strong emphasis on debt servicing pressures.

Copyright Mettis Link News