Pakistan Budget 2025–26: Complete Breakdown and Key Highlights
The Government of Pakistan officially passed the federal budget for the fiscal year 2025–26 on June 10, 2025. With a focus on fiscal discipline, defense preparedness, and economic revival, this budget reflects both the challenges and strategic priorities of the country.
In this article, we’ll break down the most important aspects of the newly passed budget, including spending targets, revenue goals, tax changes, development plans, and its overall impact on the people and economy.
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📊 Total Budget Size and Fiscal Goals
The total size of the 2025–26 federal budget has been set at Rs 17.6 trillion, which is a slight reduction compared to last year’s Rs 18.9 trillion. This cut reflects the government’s focus on reducing the fiscal deficit, which is targeted at 4.8% of GDP, down from 5.9% in the previous year.
The government has committed to strict spending controls and is focusing on domestic revenue mobilization to keep borrowing in check and stay aligned with IMF loan conditions.
🛡️ Defence Budget Sees Major Increase
One of the most notable features of the 2025 budget is the 20% increase in defence spending, rising to approximately Rs 2.55 trillion. This decision comes amid heightened regional security tensions, and reflects the government’s priority to enhance national defense capabilities.
While this move has generated debate, officials emphasize it as necessary for maintaining strategic balance and ensuring security readiness in the current geopolitical climate.
💰 Tax Collection and Revenue Targets
The government aims to meet its financial needs through improved tax collection rather than new taxes.
Federal Board of Revenue (FBR) Target:
- Total tax revenue goal: Rs 14.13 trillion
- Direct taxes: Rs 6.9 trillion
- Indirect taxes: Rs 7.23 trillion
Non-Tax Revenue:
- Expected non-tax revenue: Rs 5.17 trillion
- Major sources include petroleum levies, gas surcharges, and State Bank profit transfers
🧾 No New Taxes, But Stricter Enforcement
While the government did not announce any major new taxes in the 2025 budget, it has emphasized increased enforcement, especially through:
- Digital invoicing systems
- AI-based tax audits
- Tracking of large transactions
- E-commerce monitoring
This reflects the broader goal of raising the tax-to-GDP ratio, currently under 9%, with a medium-term target of 10% or more.
🏗️ Development Spending and Public Sector Investments
The government has allocated Rs 1 trillion for the Public Sector Development Programme (PSDP).
Major focus areas include:
- Water resources and dams
- National highways and roads
- Energy and power sector modernization
- Education and health infrastructure
Out of the total PSDP allocation, Rs 682 billion will be used by federal ministries and divisions for priority projects.
💳 Debt Servicing and Pension Obligations
A major chunk of the budget will go toward interest payments and debt servicing, which have been set at Rs 8.2 trillion.
Additionally:
- Pensions: Rs 1.05 trillion
- Subsidies and grants: Over Rs 3 trillion (combined)
These figures highlight the significant pressure of non-development expenditures on the national budget, reducing the space available for new investments.
📈 Economic Outlook for 2025–26
Despite global and regional challenges, the government has projected a GDP growth target of 4.2% for the coming year. The inflation rate is also expected to decline gradually and hover around 4.7%, offering some relief to the public.
Key factors contributing to the positive outlook include:
- Stabilization of the exchange rate
- Improvement in energy availability
- Government’s fiscal tightening measures
- Increase in exports and remittances
🗣️ Public Response and Expert Views
Public and expert responses to the 2025–26 budget are mixed:
Positive Feedback:
- No additional tax burden on salaried class
- Clear focus on economic stability and growth
- Commitment to development and social welfare
Criticism:
- Defence increase vs. cuts in public spending
- High interest payments limit development funds
- Lack of strong measures for job creation
📌 Summary of Budget 2025–26
| Category | Amount/Detail |
|---|---|
| Total Budget Size | Rs 17.6 trillion |
| Defence Allocation | Rs 2.55 trillion |
| Fiscal Deficit Target | 4.8% of GDP |
| FBR Tax Revenue Target | Rs 14.13 trillion |
| Non-Tax Revenue | Rs 5.17 trillion |
| PSDP Allocation | Rs 1 trillion |
| Interest Payments | Rs 8.2 trillion |
| Growth Target | 4.2% |
| Inflation Projection | ~4.7% |
❓Frequently Asked Questions (FAQs) – Pakistan Budget 2025–26
What is the total size of the Pakistan Budget 2025–26?
The total size of the budget for the fiscal year 2025–26 is Rs 17.6 trillion, which is slightly lower than last year’s Rs 18.9 trillion.
Why was the defence budget increased in 2025?
The government increased the defence budget by around 20% due to regional security concerns and national defence requirements. The new defence allocation is Rs 2.55 trillion.
Is there any new tax introduced in this budget?
No, the government did not introduce any new major taxes. Instead, it focused on improving tax collection through digital monitoring, audits, and AI-based tracking systems.
What is the fiscal deficit target for 2025–26?
The government has set the fiscal deficit target at 4.8% of GDP, aiming to reduce borrowing and comply with IMF loan conditions.
How much has been allocated for development projects?
The Public Sector Development Programme (PSDP) has been allocated Rs 1 trillion, focusing on infrastructure, water projects, health, and education.
What is the projected economic growth rate for 2025–26?
Pakistan’s GDP growth rate is projected to reach 4.2% in the upcoming fiscal year, driven by better fiscal management and improved macroeconomic conditions.
🧾 Conclusion
The 2025–26 federal budget reflects Pakistan’s effort to tighten its financial management while responding to emerging challenges at home and abroad. With a stronger focus on security, revenue generation, and digital reforms, the government aims to balance short-term constraints with long-term goals.
Although development spending has been modest, the drive for improved tax enforcement, targeted subsidies, and national stability offers a foundation for sustainable economic recovery.
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