Islamabad – Federal Finance Minister Muhammad Aurangzeb, while presenting the federal budget for the financial year 2026-27 in the National Assembly, termed it a serious attempt to strike a balance between Pakistan’s economic recovery, fiscal discipline and national security requirements. The government has presented a budget of Rs 18.77 trillion for the upcoming financial year, which has given central importance to defence, debt repayment, revenue growth and economic stability.
In his speech, the finance minister said that in the last few years, Pakistan has faced extraordinary economic challenges, including high inflation, external debt pressure, energy sector problems and global uncertainty. According to him, the government has put the economy on the path of stability through difficult but necessary decisions, and now the goal is to lay the foundation for sustainable development.
National security top priority
The most prominent aspect of the budget speech was the increase in defence spending. The government has set a defence budget of Rs 3 trillion for the fiscal year 2026-27, which is about 18 percent more than last year. The finance minister said that it is imperative to further strengthen defence capabilities in view of the uncertainty arising in the region, border challenges and national security requirements.
He clarified that national security and economic stability are interconnected, and Pakistan cannot afford to reduce its defence preparedness at a time when the entire region is undergoing geopolitical and political changes.
Overall budget size and fiscal strategy
The overall size of the federal budget has been set at Rs 18.77 trillion. The government has set a target of reducing the fiscal deficit, increasing revenues and limiting dependence on debt. According to the budget documents, efforts will be made to limit the overall fiscal deficit to 3.6 percent of GDP, while a target of achieving a primary surplus of 2 percent has also been set.
The government maintains that a balance between expenditure and revenue is essential to achieve the goals of the IMF program and maintain fiscal discipline. This is why emphasis has been placed on austerity and effective use of resources in several sectors.
FBR’s record tax target
A tax target of Rs 15.26 trillion has been set for the Federal Board of Revenue (FBR) in the budget. This is a significant increase over the previous year and the government is confident that this target can be achieved by expanding the tax net, digital systems, modern monitoring mechanisms and promoting a documented economy.
The Finance Minister said in his speech that preventing tax evasion and bringing the undocumented sectors into the system are among the top priorities of the government. According to him, economic justice requires that every sector contribute its fair share to the national exchequer.
Relief for the salaried class
The federal budget also paid special attention to the problems of the salaried class. The government announced some changes in the tax structure and relief measures to provide some support to the middle class, which is being hit hard by persistent inflation and rising costs.
The finance minister admitted that the salaried class has been bearing the brunt of the tax burden for the past several years, so the government has tried to provide relief as much as possible.
Development expenditure and PSDP
The size of the Federal Development Programme (PSDP) for the financial year 2026-27 has been kept at around Rs 1 trillion. According to the government, despite the limited financial capacity, priority will be given to infrastructure, education, health, water, energy and connectivity projects.
Although the development budget has not been increased significantly, the government says that the outcomes of development projects will be improved by using the available resources more effectively.
Key economic targets
The government has set several key economic targets for the next financial year:
GDP Growth: 4 percent
Inflation rate: 8.2 percent
Fiscal deficit: 3.6 percent of GDP
Primary surplus: 2 percent of GDP
The Finance Minister said that achieving these targets will not be easy, but the government is confident that it can be made possible through economic reforms and fiscal discipline.
Small businesses and retail sector
The budget has proposed several measures to make the retail sector a part of the formal economy. The government has already announced that a 1 percent income tax scheme is being introduced for shops and small traders doing business up to a certain limit in order to widen the tax net.
The government is of the view that the tax burden in the country should not be distributed on limited segments but on a wider range of economic activities.
Debt Burden and Fiscal Challenges
The Finance Minister admitted in his speech that debt and interest payments on it still constitute the largest portion of federal expenditure. He said that Pakistan will have to reduce its dependence on debt for sustainable development and increase domestic revenue sources.
According to economic experts, the budget shows that the government is trying to strike a balance between debt, defense needs and IMF program conditions.
Focus on investment and exports
The Finance Minister said that the government wants to accelerate economic activities by promoting investment, increasing exports and involving the private sector. He mentioned various initiatives, including the Special Investment Facilitation Council (SIFC), and said that restoring the confidence of foreign investors is the government’s priority.
He stressed that Pakistan needs to reduce its dependence on imports and increase its
