budget 2025-26

Pakistan budget 2025-26, expected to be unveiled on June 10, 2025, is being shaped by ongoing economic challenges and discussions with the International Monetary Fund (IMF). Key targets include a GDP growth rate of 4.2% and an inflation rate of 7.5%. The government aims to significantly boost development expenditure, with the federal allocation projected to exceed Rs 1,000 billion, supplemented by substantial provincial development programs. A major focus is on expanding the tax base and discouraging cash transactions, leading to proposals for increased taxes on bank deposits, savings schemes, and cash withdrawals by non-filers.

Among the proposed tax reforms, the budget is expected to introduce higher withholding taxes on cash withdrawals by non-filers, potentially doubling the current rate, and considering a new tax slab for large daily withdrawals. There are also proposals to increase the General Sales Tax (GST) on locally manufactured vehicles with engine capacities under 800cc, raising it from 12.5% to 18%. To curb the informal economy, a dual-pricing mechanism for cash and digital payments is being considered, where cash transactions for items like petrol would incur an additional cost. While there’s a push for increased revenue generation, the government is also exploring modest tax relief for the salaried class, with a potential small reduction in their tax rates.

Development priorities in the budget reflect a strategic focus on large-scale infrastructure projects, despite some proposed cuts to allocations for education, health, and water sectors at the federal level. Provincial governments, however, are planning significant increases in their development spending. The overall budget aims to strike a balance between fiscal discipline, inflation control, and economic stimulus, with a strong emphasis on integrating undocumented sectors into the tax net and promoting digitalization to enhance transparency and compliance.