ISLAMABAD – Finance Minister Muhammad Aurangzeb announced on Saturday that Pakistan’s economy is transitioning from stabilisation to growth. He described the annual budget for fiscal year 2026-27 as a people-friendly budget, highlighting reductions in the tax burden on the salaried class, additional subsidies, and a foundation for export-led growth.
Economic Direction and Progress
“The economy is moving in the right direction and we will now move from economic stability to growth,” Aurangzeb stated during a post-budget press conference. He was joined by Minister of State for Finance and Revenue Bilal Azhar Kayani and Information Minister Attaullah Tarar. Reflecting on the previous year, he noted, “When we sat here last year, we spoke about economic recovery. Today, I can say that we have made meaningful progress and are now moving forward towards growth.”
Provincial Development Freeze and Salary Increases
The finance minister confirmed that the freeze on provincial development programmes, expected to generate over Rs900 billion for the Centre’s strategic needs, will remain in place for three years. Regarding the 7% increase in salaries and pensions for all government employees, Aurangzeb said the benchmark was determined based on the inflation index and termed the raise “satisfactory” in light of the tax relief provided.
Tax and Export Framework
Aurangzeb emphasised that the government has focused on strengthening the tax and export framework in the budget. “We have utilised the available fiscal space in the best possible manner. The main theme of this budget is export-led growth. A key question has been what constitutes the enabling environment for exports, and in this budget, we have made comprehensive efforts to address those factors.” The government has also abolished the advance tax for export-led growth.
Super Tax Reductions
The finance minister announced that the government has abolished the super tax for businesses earning more than Rs500 million. He added that Prime Minister Shehbaz Sharif and the cabinet have directed the abolition of the super tax for certain sub-exporters, which will be announced in the windup budget speech in the coming days. “We have reduced the super tax rate for large businesses from 10 percent to 8 percent, which is a significant move in the right direction.”
Tax Base Broadening and Modernisation
Talking about taxation measures, Aurangzeb informed that the government is focusing on broadening the tax base through structural reforms. The government is working on a modern tax operating model based on automation, artificial intelligence, and reduced human intervention to improve efficiency and transparency. “We want to move towards a technology-driven, faceless system in income tax and sales tax, similar to what has been introduced in customs,” he said.
Agriculture Sector Initiatives
On agriculture, Aurangzeb said agricultural credit has grown by 15%, with the total volume now exceeding Rs2 trillion. The government has abolished custom duty, additional custom duty, and regulatory duty on agricultural machinery. The Zarkhez-e-Asaan scheme is progressing effectively. Under the Prime Minister Youth Programme of Rs262 billion, the government has allocated Rs125 billion for the agriculture sector.
Relief for Salaried Class and Housing Sector
The finance minister stated that the government has reduced the burden on the salaried class. People earning Rs300,000, Rs500,000, Rs800,000, or Rs1.2 million per month will all experience a reduction in their tax burden. The government has also revised tax rates on housing and construction sectors. Loans of up to Rs10 million will be available under the Apna Ghar Scheme. Information Minister Attaullah Tarar said the lower and middle classes have been given facilities to build their own homes, and property sales tax has been reduced for the middle class, adding that 12 industries are linked to housing and construction.
Public Budget for All Segments
Bilal Kayani described the budget as a public budget, catering to industrialists, salaried people, exporters, the construction sector, and those seeking to build their own homes. He noted that the BISP budget has been increased for 10 million deserving families, and steps have been taken to improve the social sector.
Prime Minister’s Promises and Pink Tax Elimination
Information Minister Tarar said the Prime Minister has fulfilled promises to provide relief to the people, calling it a budget for labourers, farmers, women, salaried people, and the middle class. He further announced that the pink tax on women-related items has been reduced from 18% to zero.
NFC Formula and Private Sector Promotion
Finance Minister Aurangzeb said the National Finance Commission (NFC) formula should not be based solely on population. The federal government will change this formula in consultation with the provinces, as the country’s population is estimated to reach 400 million by 2040, necessitating a review. He emphasised the government’s desire to promote the private sector and involve it in commercial projects, noting that the Sindh government has shown progress through public-private partnership projects.
Merger of BOI with SIFC and Petroleum Levy
Aurangzeb revealed that duplication of work between the Board of Investment and SIFC has been identified, and the prime minister has taken an in-principle decision to merge the Board of Investment with SIFC, aiming to deal with foreign investors through a one-window system. He confirmed that the amount of petroleum levy is not being increased. He also mentioned that Pakistan’s leadership has tried to resolve the conflict in the Middle East, noting that energy installations have been targeted, and its effects will be felt in the coming year.
Past Commitments and Salary Adjustments
Aurangzeb said that during the war with India, the Fund’s board approval was completed, and no mini-budget was introduced. He reiterated the government’s promise to bring relief to the people once difficult times passed. Finance Secretary Imdad Ullah Bosal clarified that ad hoc relief allowances of 2022 and 2025 have been merged into the basic pay, and the 7% raise in salaries will be given after the merger of the two ad hoc relief allowances.
