This demarcates a crucial time for Pakistan since the federation’s budget is being set for the future. Facing problems of international tension, economic doubt, and pressure from creditors, the country’s leaders have made a budget that tries to keep everything balanced. According to many sources, it is a vigorous but at the same time controversial outline.
We should examine the important parts of the budget to know how it influences the country’s economy, citizens, and plans.
- The Budget at a Glance
For the fiscal year 2025–26, the budget is ₨17.57 trillion, which is 7% less than the previous fiscal year. Many might wonder how tax revenue can fall given that both inflation and the size of the population keep growing. But it indicates that the government is making an effort to lower the budget deficit and stick to the conditions it made with the International Monetary Fund (IMF).
Even with the overall decrease in spending, defence spending has gone up to ₨2.55 trillion from ₨2.1 trillion last year, an increase of almost 20%.
This year’s fiscal deficit target is set at 4.8% compared to 5.9% recorded the year before. The experts project GDP growth to increase to 4.2%, which is much better than the forecasted 2.7% growth for the previous financial year.
- The Quick Growth in Defence Expenses
Adding more money for defence is definitely the main focus of this year’s budget. Now that many other sectors grapple with budget cuts, defence has come out as the leading winner.
Why the Increase?
Rising oil prices are a result of geopolitical issues, the biggest one being with India. A recent increase in tension put national security concerns back on people’s minds. The Pakistan government has declared that its efforts to stop Indian aggression are successful, and the new budget is set to develop and upgrade the military.
Responses from Public and Political Aspects
Although national pride has increased after these events, some people argue that what we gave up wasn’t worth it. Many feel it may not be wise to keep defence as the top spending category when everyday citizens struggle because of high inflation and when there are urgent calls for funds for health, education, and environmental protection.
- Measures Set by the IMF and Austerity Actions
A huge IMF bailout program is still supporting Pakistan. It is required by law for politicians to act responsibly with money.
Budget Cuts and Reforms
In order to follow the IMF’s wishes, the government has decreased its spending and agreed to reforms. These include:
- Adding agriculture and retail to the range of taxed activities.
- Decreasing financial support given to the energy and industrial sectors.
- Selling or remodeling companies that the government owns.
Since there have been delays in reforms, some people now doubt whether the government can keep its promises. The budget will work well only when the promised actions are put into practice.
- Taxation: Widening the Net
Drawing in more tax revenue is a top goal for this budget. Long-standing concerns focus on Pakistan’s one of the lowest rates of tax to gross domestic product compared to other countries.
Key Tax Reforms Announced
- Income tax on agricultural income, which has long been exempt despite agriculture’s large share in GDP.
- Increased regulation and taxation of the retail and real estate sectors.
- New withholding taxes are aimed at capturing untaxed segments.
Proper implementation of the reforms could bring in more money for the government. Even so, presuming powerful interest groups are involved, applying the law becomes a challenge to administer.
- Debt Servicing: The Elephant in the Room
The government is also dealing with the rising external and domestic debts of Pakistan. For the current fiscal year, the government has to spend more than half of its total income on debt payments.
Thus, governments have very limited budgets for improving social or economic conditions. Even though interest rates are going down, the expenses associated with current loans are still too much. In analysts’ opinions, unless Pakistan either restructures its loans or improves its financial intake, it will find it hard to break free from this debt situation.
- Growth Targets: Realistic or Ambitious?
The government forecaststhe FY 2025–26 growth rate to reach 4.2%, much higher than the anticipated growth for the present year.
Growth Drivers
- Agriculture: Expected to benefit from new subsidies and better irrigation projects.
- Industry: Some relief from interest rates may boost productivity.
- Exports: The IT sector and textiles remain key, though their potential is underutilized.
Still, some claim that the chosen targets are not realistic, considering that public investments in Europe have been reduced and austerity seems to be slowing down.
- The IT Sector: A Missed Opportunity
To our surprise, the budget does not help Pakistan’s IT industry, despite its great chance to grow exports.
Leading companies in the IT sector are expressing dissatisfaction at the small amount of subsidies and the lack of importance given to policies. It matters a lot as digital economies develop worldwide, giving Pakistan a perfect chance to use its young people to boost technology in the country.
Without help from the government, the industry could find it challenging to fulfill its potential.
- Development Spending and Social Services
Since the government is cutting down on spending, health, education, and climate budgets have remained at low levels.
Education and Health
Money for these areas is not plentiful, even though they support the country’s future and the people in it. Low literacy levels, lack of good public health care, and urbanization are some of Pakistan’s current issues.
Climate and Environment
Nevertheless, efforts to adapt to climate change are being neglected even after suffering from severe floods in the region. Many international groups have raised concerns about the government not giving enough funds to strengthen resilience.
- Political and Public Response
People across Pakistan have responded to the 2025–26 budget with a wide range of emotions—some praising it as a necessary step toward economic stability, while others criticize it for favoring military spending over essential services like education and healthcare, leading to intense debates among citizens, experts, and political leaders.
It is argued that such an approach shows fiscal understanding and commitment to good management of the entire economy.
- Supporters argue it shows maturity in fiscal planning and demonstrates a responsible approach to macroeconomic management.
- Critics, including opposition parties and civil society, label it elitist, arguing it places a disproportionate burden on the middle and lower classes.
- Geopolitical Fallout and Defence Economics
One cannot overlook the main reasons behind the rise in defence spending. It displays how Pakistan’s security situation is getting more involved.
Strategic Objectives
- Strengthen the country’s systems for shielding against enemy attacks from the air and missiles.
- Buy upgraded weapons and improve the way the military is led.
- Make sure our intelligence and cyber-warfare abilities are advanced.
Though these investments are well thought out, doing them now when the economy is unsteady causes worry. Some critics argue that taking care of economic security should be the priority.
- Opportunities for Reform and Recovery
Although the budget contains weaknesses, it can give way to important reforms if the government is properly committed to them.
The Required Steps
- Use strict methods to reform taxes and ensure that all sectors with high incomes follow the rules.
- Get rid of non-productive subsidies and apply the money instead to education and health.
- Help to develop new industries, especially those in IT, clean energy, and agritech.
- Make sure to act openly and honestly to restore the public’s faith in the government.
- Support more collaboration between private companies and the government.
- Risks on the Horizon
Pakistan’s economy is exposed to threats coming from within the country and from other places.
- Especially high and low prices of oil and gas in the global market.
- When there is political uncertainty, it may halt efforts to reform.
- Changes in the climate are becoming a danger to both farming and cities.
- If earnings keep being meager, the government may be unable to pay its debts.
It is important to deal with these risks by strengthening governance and crisis management abilities.
Conclusion
Pakistan’s budget for 2025–26 shows the country dealing with strict demands from the military, the IMF, and the needs of its people. The purpose is to ensure that defence, debt, and development do not exceed the country’s available money.
The key strengths of the budget are:
- A realistic fiscal deficit target.
- Bold steps toward tax reform.
- A clear intent to improve macroeconomic stability.
Basically, a budget is a decision made from both political and economic viewpoints. When the government makes reforms transparently and fairly, Pakistan could avoid going through financial crises again. If so, the country may experience another round of no growth, dissatisfaction, and a need for outside aid.