Pakistan Unveils Rs18.8 Trillion Budget for FY2026-27, Targets 4% Economic Growth

Pakistan's Finance Minister Muhammad Aurangzeb presented the Rs18.8 trillion budget for Fiscal Year 2026-27 in the National Assembly (NA). The session, presided over by NA Speaker Ayaz Sadiq, began two hours after its scheduled time and faced protests from the opposition.

The budget outlines a total outlay of Rs18.8 trillion, with Rs8,045 billion allocated for markup payments. The government projects an economic growth rate of 4% for FY2026-27, with average inflation expected to be 8.2%. The fiscal deficit is targeted at 3.6% of GDP, and a primary surplus of 2% is anticipated.

Estimated tax revenue for FY2026-27 stands at Rs15,264 billion, marking a 17.6% increase from the outgoing year's Rs12,983 billion. Provinces are expected to contribute Rs8,848 billion to federal revenue. Federal non-tax revenue is budgeted at Rs5,336 billion, resulting in a net federal revenue of Rs11,751 billion.

A mechanism for federal-provincial cooperation on revenue sharing was also announced. Under this arrangement, provinces' share in the federal divisible pool will adhere to the 7th National Finance Commission award. Rs13,250 billion from the estimated tax revenue of Rs15,264 billion will be available to provinces as grants under Article 164 of the Constitution to meet national strategic demands. This mechanism is set for FY2026-27 and is planned for renewal with provincial consultation for FY28 and FY29.

Key allocations within the budget include Rs3,000 billion for defence and Rs1,071 billion for civil administration expenditures. The federal Public Sector Development Programme (PSDP) is allocated Rs1,000 billion, increasing to Rs1,451 billion with funds for state-owned enterprises and public-private partnerships. The minister stated that defence remains a top priority and has become a source of foreign exchange earnings.

Aurangzeb also highlighted Pakistan's foreign policy efforts, including a defence pact with Saudi Arabia last year, and mediation efforts for peace between the US and Iran, noting China's support in these endeavors. Regarding the economy, he mentioned that the country's GDP growth for the outgoing fiscal year was 3.7%, with large-scale manufacturing growing at 6.1% and the services sector at 4.1%. He reported that the economy's size increased to $452 billion, per capita income rose to $1,901, and foreign exchange reserves reached $17 billion. Remittances were projected to exceed $41 billion by the end of FY26.

The budget presentation was preceded by political developments, including meetings between Prime Minister Shehbaz Sharif and allied parties. The Pakistan Peoples Party (PPP), a key ally, raised concerns about water shortages in Sindh and Balochistan and demanded respect for its political space, with some members staging protests during the session. The federal cabinet had earlier approved the budget in a meeting at Parliament House, and the Prime Minister also met with a delegation from the Muttahida Qaumi Movement-Pakistan (MQM-P).

(Source: Dawn Pakistan)