A Budget of Relief, Reform and Resilience

The Finance Minister of Pakistan Muhammad Aurangzeb has just announced the federal budget for the FY 2025-26. This budget is more than just an annual fiscal document – it is a powerful signal of economic resilience, maturity and forward-thinking governance in a fragile global economic environment.

The world is grappling with economic fragmentation, slowing growth, and climate-induced vulnerabilities. Despite this, Pakistan’s budget stands out not only for its strategic vision but also for its commitment to protecting its people, promoting equity and laying down the foundation of long-term development.

Framed under the leadership of Finance Minister Muhammad Aurangzeb and presented with clarity by Prime Minister Shehbaz Sharif’s government, this budget doesn’t merely respond to crisis – it sets the tone for economic transformation.

Where many governments around the world are still struggling to contain inflation and sluggish recovery, Pakistan’s macroeconomic indicators have decisively turned a corner. Inflation has dropped dramatically over this year – from a debilitating 29.2% to just 4.7%, and the primary surplus has reached GDP of 2.4 per cent.

These numbers matter deeply in a region like South Asia and even globally, where fiscal instability has historically deterred investment and threatened growth. More importantly, this turnaround wasn’t the result of one-time bailouts or reactionary policies.

There were no mini-budgets nor new taxes, only disciplined financial stewardship, bold structural reforms and a focused drive toward performance-led governance. Pakistan’s external confidence is at a high, as evidenced by $31.2 billion in remittances, an all-time high on the KSE-100 index, and sovereign credit upgrades from agencies like Fitch and a positive sentiment from the World Bank, ADB and IFC.

These are not mere symbolic metric. Instead, they reflect international trust in Pakistan’s trajectory. Aided by an expanding remittance base, a strengthened rupee and growing investor appetite, the economy healing and pivoting.

Perhaps the most understated strength of this budget lies in its pro-people character, particularly for salaried individuals. While inflation remains low, the government has proposed a significant easing of the tax burden on the middle class.

The 600,000 – 1.2 million rupee income slab, which previously faced a 5% tax rate, will now only be taxed at only 1%. Individuals earning up to 2.2 million rupees will benefit from a rate drop from 15% to 11%.

This is economic justice in the form of a revised tax policy. For a country like Pakistan, that has often overlooked the salaried class in the previous governments, this policy acknowledges their contribution and addresses their inflation-fatigued wallets.

At the same time, the government hasn’t forgotten its responsibility to broaden the tax net. Rather than impose burdens on compliant taxpayers, the Federal Board of Revenue (FBR) has been restructured for transparency and performance. Using AI-powered audit systems, digital production tracking, faceless customs procedures and integrated invoicing mechanisms, the government has embraced digital enforcement over coercion.

Results show that over 390,000 high-value non-filers identified, Rs9.8 billion in fake refunds blocked, and a doubling in the tax-paying entity base. This is what modern fiscal governance looks like.

Simultaneously, the government is making serious efforts in bringing about structural reforms. The consumption-led model that repeatedly brought Pakistan to the brink has been replaced in favour of an export-led, investment-oriented framework. Industrial tariffs are down by 31%, inefficient furnace oil plants are being retired and Rs3 trillion has been saved through IPP renegotiations.

In addition, there is proactive debt management strategy: Rs1 trillion in domestic debt bought back, debt-to-GDP falling below 70%, and the picture that emerges is of a country finally breaking the cycle of crisis management.

However, budgets are not only about economic numbers, but also about vision. The budget for 2025–26 speaks to a long-term development agenda that is national in scope and inclusive in spirit. For instance, Rs716 billion has been allocated to BISP, with over 10 million families supported.

Education and health together have received over Rs2 trillion in combined spending. Moreover, the entire budget framework has been aligned with provincial coordination, ensuring that more than 60% of provincial ADPs are directed toward human development: health, education, water and social protection.

For the country’s future workforce, the budget also carves out new spaces. Whether it’s offering Rs100,000 collateral-free loans to 750,000 small farmers or providing Rs641 billion in financing to SMEs, the vision is entrepreneurial.

In the digital domain, IT exports have surged 21.2% and the target of $25 billion in five years is ambitious, but within reach, given the flourishing startup ecosystem that has created 185,000 jobs. This is supported by landmark regulatory upgrades, from better cybersecurity frameworks to improved e-government rankings globally.

This budget is also the first climate-conscious budget in the history of Pakistan. Green Sukuks worth Rs30 billion have been issued, and Pakistan is now aligned with a $40 billion World Bank-IFC partnership that puts climate resilience at its core. In a world where ESG compliance increasingly guides capital flows, this will be a major advantage.

Critics may argue that many of these reforms will take time to materialize, which is logical. But the fact that the current administration is thinking in terms of development and economic progress is precisely what sets this budget apart. It reflects a level of coordination, courage and clarity not often seen in Pakistan’s fiscal history. Rather than short-term populism, the government has chosen long-term discipline.

As we compare this to global fiscal responses, the contrast becomes sharper. While advanced economies resort to inflationary stimulus and emerging markets scramble with austerity, Pakistan has carved a unique middle path: relief without recklessness, growth without instability and reform without delay.

In conclusion, Budget 2025–26 is a turning point for the country. It marks the transition of Pakistan’s economy from fragility to foresight. And while challenges will remain, as they do for every nation in this global environment, the commitment to a stable, sovereign and sustainable economic future is now unshakeable.

Pakistan, under the leadership of Prime Minister Shehbaz Sharif and Finance Minister Muhammad Aurangzeb, has shown that recovery is possible, economic resolve is real, and reform is not just an idea – it is an agenda in motion.