Pakistan's federal budget for fiscal year 2026-27 is broadly positive and offers relief to key economic sectors, a brokerage report said, while warning that revenue mobilization under International Monetary Fund benchmarks will remain challenging.
Budget Overview
The government unveiled a Rs18.77 trillion ($67.49 billion) federal budget on Friday, boosting defense spending and setting ambitious revenue targets to sustain the IMF-backed economic recovery amid fiscal pressures and regional tensions. The government targets four percent economic growth and 8.2 percent inflation for the fiscal year starting in July.
Topline Securities Report
In a report published on Saturday, Topline Securities said the budget seeks to support growth and ease pressure on households while preserving fiscal and external discipline. The report stated: "We believe this budget is positive for the market due to measures like reduction in super tax, continuation of exemption on the IT sector, support to exporters and refineries, and positive real estate measures like reduction in duties and housing subsidy."
The report added that the government would likely introduce additional tax measures or policy steps to meet the IMF target of collecting Rs15.3 trillion ($55 billion) in fiscal year 2026-27.
Relief Measures
Topline highlighted relief measures including:
- Lower tax rates for middle-income salaried individuals
- Removal of surcharge on incomes above Rs10 million ($35,971)
- A cut in super tax
- Relief for exporters
- Incentives for real estate
- Extension of reduced GST on electric vehicles (EVs)
The government used available fiscal space to grant tax relief to salaried individuals and businesses by lowering tax slabs and abolishing the super tax.
Revenue Challenges
Measures aimed at boosting tax collection rely largely on administrative reforms and higher taxes on retailers. The report warned that any revenue shortfall could force the government to roll back relief measures or cut development spending.
Economic Outlook
Topline expects GDP growth of 3-3.5 percent and inflation of 8-8.5 percent, while the government targets four percent growth and 8.2 percent inflation for FY27. The IMF expects Pakistan's GDP to grow 3.5 percent and inflation to average 8.4 percent.
Topline maintained its Pakistan Stock Exchange target of 203,000 for December this year, warning that continued US-Iran tensions and rising oil prices remain key risks to the index outlook.
According to the government, Pakistan's economy grew an estimated 3.7 percent in the outgoing fiscal year, while inflation fell sharply from multi-decade highs during the recent economic crisis.
