Highlights of Budget 2026-27

MG News | June 12, 2026 at 05:12 PM GMT+05:00

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June 12, 2026 (MLN): Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, has begun presenting the Federal Budget for FY2026-27 in the National Assembly, unveiling the government's fiscal strategy, taxation measures, and economic priorities for the upcoming financial year.

He stated that Pakistan is increasingly recognised and admired worldwide for its economic and strategic role.

He further said that discussions also included Pakistan–Saudi Arabia defence cooperation, along with broader deliberations on wartime preparedness and strategic coordination between the two countries.

The minister’s remarks underscore the need to strengthen bilateral ties and to maintain ongoing engagement on security and defence-related matters at the policy level.

"The government has reviewed the impact of rising global oil prices and acknowledged the pressure it places on domestic inflation and external accounts," he said.

He clarified that the government has not passed the full impact of global oil price increases onto consumers. Instead, it has provided targeted subsidies and relief measures to shield vulnerable segments of society from the immediate burden of rising energy costs.

The minister emphasized that this approach reflects a balanced strategy, managing fiscal pressure while ensuring relief is directed where it is needed most.

Economic Review

"This is the current government's third budget. Therefore, I consider it essential to briefly cover the journey of the past two years at the beginning of this speech. We started this journey from a difficult position," he added.

The Finance Minister said the government inherited a difficult economy but has achieved stabilization and recovery over the past two years.

He highlighted stronger macroeconomic indicators, including 3.7% growth, a $452 billion economy, higher per capita income, lower inflation, improved reserves, and rising remittances expected to cross $41 billion. Fiscal stability has also improved with a lower deficit and a primary surplus, while interest rates have been sharply reduced.

He noted improved investor confidence, supported by credit rating upgrades, successful return to international capital markets, a stronger stock market, and growing foreign and local investment.

On reforms, he pointed to privatization progress, major FBR restructuring that boosted revenues, and wider digitalization of tax and financial systems. He also emphasized expansion in financial inclusion through new loan schemes, youth programs, and digital banking growth.

In sectoral development, he cited export-friendly policies, energy reforms that reduced costs and circular debt risks, new oil and gas discoveries, and strong growth in IT and telecom exports.

Salient features of the budget for the fiscal year 2026-27:

The economic growth rate for the fiscal year 2026-27 is likely to remain at four (4) percent. The average inflation rate is expected to be 8.2 percent. The budget deficit will be 3.6 percent of GDP, while the primary surplus will be 2 percent of GDP.

FBR revenues are estimated at 15,264 billion rupees, which is 17.6 percent higher than the current fiscal year.

The share of provinces in federal revenues will be 8,848 billion rupees.

The federal government and provincial governments have agreed on an arrangement to collectively meet certain national requirements, which will have positive impacts at the national level. This arrangement has been settled under the spirit of Cooperative Federalism and without affecting the constitutional rights of the provincial governments. Under this arrangement, the share of provincial governments in the Federal Divisible Pool will continue to remain according to the 7th National Finance Commission (NFC) Award. For the fiscal year 2026-27, the expected collection of revenues by the Federal Board of Revenue is 15,264 billion rupees. However, in view of strategic national requirements, an amount of at least 13,350 billion rupees has been kept reserved for distribution between the federal and provincial governments. The amount collected from 13,350 billion rupees up to 15,264 billion rupees will be available to the federal government in the form of grants by the provincial governments under Article 164 of the Constitution of Pakistan 1973 to fulfill national strategic requirements. This arrangement will be applicable for the fiscal year 2026-27 and will be renewed on similar grounds with mutual consultation of the federal and provincial governments for the fiscal years 2027-28 and 2028-29.

The target for federal non-tax revenue will be 5,336 billion rupees.

The net income of the federal government will be 11,751 billion rupees.

The total expenditures of the federal government are estimated at 18,771 billion rupees, out of which 8,054 billion rupees will be allocated for markup payments.

A budget of 1,000 billion rupees has been allocated for the federal Public Sector Development Programme (PSDP).

The current expenditure of the federal government is estimated at 17,495 billion rupees.

National defense is the most important priority of the government. 3,000 billion rupees will be provided for this national duty.

1,071 billion rupees are being allocated for civil administration expenditures. 1,169 billion rupees have been allocated for pension expenditures. An amount of 1,091 billion rupees is being allocated as a subsidy for electricity and other sectors.

In the category of grants, 2,680 billion rupees are being allocated, which are for BISP, Azad Jammu & Kashmir, Gilgit-Baltistan, and the newly merged districts of Khyber Pakhtunkhwa, etc.

An amount of 71 billion rupees has been allocated for the Prime Minister's Apna Ghar Scheme.

88 billion rupees have been allocated for the expansion of the Export Refinance Scheme, which will help promote exports.

The government intends to increase the coverage of flagship initiatives of BISP. To implement this, the Kafaalat program will be expanded to 12 million families. The educational scholarships program will be further expanded so that approximately 9,200,000 children can benefit. In the next fiscal year, it is proposed to allocate 838 billion rupees for BISP, which is 17 percent higher compared to last year.

From current expenditures, it is proposed to allocate 146 billion rupees for Azad Jammu & Kashmir, 88 billion rupees for Gilgit-Baltistan, and 95 billion rupees for the newly merged districts of Khyber Pakhtunkhwa.

Budget Outlay

The federal government’s proposed fiscal framework for FY2026-27 outlines a total budget size of Rs18.771 trillion, reflecting continued fiscal tightening amid rising structural expenditure pressures.

According to budget documents, current expenditures are projected at Rs17.495 trillion, with the single largest component being debt servicing and mark-up payments amounting to Rs8.054 trillion.

This includes domestic debt servicing of Rs6.983 trillion and external debt payments of Rs1.071 trillion, highlighting persistent pressure from the country’s growing debt burden.

On the defence side, allocations are set at Rs3 trillion, while pensions are projected at Rs1.169 trillion, including Rs822 billion for military pensions and Rs272.5 billion for civil pensions.

Subsidies have been budgeted at Rs1.091 trillion, while the running of civil government expenses stand at Rs1.071 trillion. Meanwhile, grants and transfers are estimated at Rs2.68 trillion, reflecting higher intergovernmental and institutional support.

The government has also allocated Rs430 billion for emergency and contingency requirements, including disaster-related provisions.

On the resource side, the Federal Board of Revenue (FBR) has been assigned a tax collection target of Rs15.264 trillion, while non-tax revenue is projected at Rs5.336 trillion, taking gross revenue receipts to Rs20.6 trillion.

After provincial transfers of Rs8.848 trillion, net federal revenue stands at Rs11.751 trillion. Additional financing will come from bank and non-bank borrowing, external inflows, and privatisation proceeds, collectively forming a significant portion of total resources.

For development spending, the Public Sector Development Programme (PSDP) has been set at Rs1 trillion, indicating a relatively restrained development outlay compared to the heavy current expenditure load.

Overall, the budget framework reflects a tightly balanced fiscal position, with both total resources and expenditures aligned at Rs18.771 trillion, underscoring continued reliance on borrowing and a dominant share of spending directed toward debt servicing and defence.

Public Sector Development Programme (PSDP)

This program is the instrument of government investment through which we utilize national and foreign resources for social and economic development.

In the National Economic Council meeting held on June 10, 2026, the national development program for the fiscal year 2026-27 was approved, the volume of which is 3,675 billion rupees. This includes 1,000 billion rupees for the federal development program (PSDP), 2,224 billion rupees for all provincial development programs, and 451 billion rupees for investment by State-Owned Enterprises (SOEs).

This distribution reflects the new division of duties after the 18th Constitutional Amendment, under which the responsibility of the social sector has largely shifted to the provinces, while the federation focuses specifically on strategic projects of national importance.

More than 60 percent of the federal development program is focused on key sectors including transport & communication, water resources, and energy, while the remaining portion is divided among other vital sectors including IT, science & technology, agriculture, health, and education. All these projects are aligned with "Uraan Pakistan" and the National Economic Transformation Plan's 5 Es. Now I present the details of these sectors:

Transport and Communication

The development of highways, rail, and ports is at the top of our priorities. In the federal development program 2026-27, the highest amount of 365 billion rupees has been allocated for the improvement of transport infrastructure. In this, an amount of 100 billion rupees is at the top for dualizing Balochistan's most important highway, N-25 Pakistan Expressway, which connects Karachi to Chaman.

Similarly, for the completion of the North-South motorway network, an investment of 30 billion rupees will be made on M-6 (Sukkur-Hyderabad Motorway), while work on the Karachi-Rohri section of ML-1 will start from the upcoming fiscal year with new financing from ADB, for which 25 billion rupees have been allocated. 2 billion rupees have been kept for the Thar Coal Connectivity Project.

This is the project that will connect our local energy reserves with the national transport system. Apart from this, an amount of over 93 billion has been allocated for the infrastructure of Gwadar Port and transport projects in all four provinces so that faster means of transport are available across the country.

Energy and Power

The provision of cheap, reliable, and sustainable energy is the commitment of this government and the fundamental need of the economy. In the federal development program 2026-27, 116.2 billion rupees have been allocated for the power sector.

This includes key hydropower projects like the Dasu Hydropower Project, the fifth extension of Tarbela Dam, and the Mohmand Hydropower Project. To increase electricity transmission capacity, investments of 10.2 billion and 3 billion rupees are included for modern systems like STATCOM and battery storage, respectively.

The budget speech is being closely watched by investors, businesses, and taxpayers for announcements relating to taxes, development spending, fiscal targets, and economic relief measures.

This is a continuing story and will be updated with further details.

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