Pakistan’s difficult balancing act between reforms and income Blogging Sole

Pakistan’s difficult balancing act between reforms and income Blogging Sole

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The federal budget for the year 2025-20126 promises to be a Lourain guided document of the reform and guided by the IMF aimed at stabilizing the economy while concluding a delicate balance between budgetary consolidation and targeted emergency services.

The budget will be presented by the Minister of Finance Muhammad Aurangzeb to the National Assembly on June 10, if there are no other delays. It was previously scheduled for June 2, but the date was put forward after the interviews with the IMF on tax clashes.

Before the budget, analysts of Topline Securities and Arif Habib Limited (AHL) provide that the government will maintain its history of improving primary balance, aimed at 1.6% of GDP this year.

The Federal Collection of the Board of Directors of Revenue (FBR) is provided for at RS13.9-14.3 Billions, which implies growth of 16 to 18% in annual sliding, the slowest rate in six years (Topline, p.3). This growth should come from an inflation rate of 7.7% and a gross domestic product expansion (GDP) of approximately 3.6 to 4.0% (topline, p.3; AHL, p.4), the rest driven by 500 to 600 billion rupees in new tax measures.

Budgetary discipline will be reinforced by controversial measures such as potential pensions tax, general sales tax (TPS) on petroleum products and the abolition of long -standing exemptions. Simultaneously, relief for the salaried class, the financing of housing and certain industrial sectors are expected.

The stamp of the IMF is clear: no amnestics, a repression against non-sequences and an expansion of the tax base in the sectors. The budget, although neutral short -term for actions, should strengthen market confidence in the medium term.

Key budget expectations for financial year 26

Macroeconomic targets

  • GDP growth: 3.6-4.0% (topline, p.3; AHL, p.4)
  • Inflation (AVG.): 5.77% (topline, p.12)
  • Primary surplus: 1.4-1.6% of GDP (topline, p.3; Ahl, p.4)
  • Budget deficit: RS6.5 Billion or 5.1% of GDP (AHL, p.3)

Income measures

  • TPS on petroleum products (3-5%): should increase petrol prices by RS8-13 / liter (AHL, p.6)
  • Levy of Upper Oil Development (PDL): targeted at RS1,3-1,4 Billion, up RS5 / liter (topline, p.5; Ahl, p.4)
  • Retirement tax: Tax offered from 2.5 to 5% on pensions exceeding 400,000 rupees / month (topline, p.4)
  • Magnetic taxes, vloggers, social media income: 3.5% tax, potentially generating 52.5 billion rupees (topline, p.5)

The federal excise duty (Fed) increases:

  • Cigarettes: expected increase due to the pressure of the WHO (topline, p.6; Ahl, p.4)
  • Sugar drinks: increase offered from 20% to 40% (AHL, p.8)
  • Ultra-transformed foods: 5% Fed expected on more than 50 products (topline, p.5; AHL, p.4)
  • Fertilizers and pesticides: 5% additional Fed (topline, p.5; AHL, p.6)
  • Fata / pata exemption Reposition: withdrawal of exemptions from the sales tax (topline, p.5; AHL, p.4)
  • Retailers tax: Covering target of 295 billion rupees fixed by the IMF (topline, p.5)

Rescue measures

  • Employee class: increase in the exemption threshold of 600,000 rupees to RS800,000; Tax rate of 2.5% possible on supports (topline, p.6; Ahl, p.6)
  • Minimum wage and bisp adjustments: likely to be indexed for inflation (topline, p.6)
  • Housing finance grant: loans for 200,000 houses under interest grant (Topline, p.6; Ahl, p.7)

Sector expectations

Oil and gas / WTO / refineries

  • PDL extension on FO and introduction of carbon tax (topline, p.5; Ahl, p.6)
  • TPS 3 to 5% on petroleum products (AHL, p.6)
  • Additional samples on coal and gas (topline, p.21)

Fertilizer

  • Fed increases from 5% to 10%, increasing the prices of UrĂ©e from RS200-225 / BAG (topline, p.19; AHL, p.6)
  • 5% sales tax on pesticides (topline, p.19)

Technology and IT

  • Probable on the 0.25% final opposition regime (Topline, p.20)
  • No tax harmonization for employed IT workers VS independent (topline, p.20)

Cement

  • Public sector development program (PSDP) Award of RS900-950 billion expected (Topline, p.21)
  • Housing finance grant to increase cement demand from 1.5 to 2.0 million tonnes (topline, p.21)

Steel

  • FATA / pata tax exemptions will be deleted (topline, p.22; AHL, p.7)

Cars

  • Proposal to authorize the import of used cars up to five years (Topline, p.27; Ahl, p.8)
  • Gradual reduction in prices on imported vehicles (AHL, p.8)

Stock market

  • No modification expected in CGT on actions (topline, p.14)
  • Pakistan Stock Exchange proposals (PSX) on Rollback bonus shares and an exemption from inter-company dividends cannot be accepted (Topline, p.15)

While the government led by Shehbaz Sharif is preparing to unveil the finance bill for 2025-26, all eyes are fixed on the way it walks on the striped rope between the conditions of the IMF and local expectations.

By focusing on budgetary consolidation, the expansion of the tax net and limited but strategic relief for salaried and commercial courses, this budget could define the macroeconomic trajectory of Pakistan before the next IMF review in September.

While industries are preparing for stricter regulations and taxes, emphasis on stability, reform and debt control marks a critical pivot in the development of economic policies in Pakistan.

A man walks with bags of supplies on his shoulder to deliver to a nearby store in a Karachi market on June 11, 2024. – Reuters

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