NEC likely to approve Rs1.13tr uplift plan

May consider an increase of Rs200b in PSDP tomorrow

ISLAMABAD:

The federal government is expected to approve a development outlay of around Rs1,126 billion for the fiscal year 2026–27 during the upcoming National Economic Council (NEC) meeting scheduled for tomorrow (Monday), according to finance ministry sources.

The meeting, chaired by Prime Minister Shehbaz Sharif, is likely to consider an increase of approximately Rs200 billion in the Public Sector Development Programme (PSDP).

Federal ministers, chief ministers of all four provinces, Gilgit-Baltistan (G-B), and the prime minister of Azad Jammu and Kashmir (AJK) are expected to attend.

Sources said the Economic Survey for the outgoing fiscal year is likely to be presented on June 9, followed by the federal budget for 2026–27 on June 10, with an estimated total outlay of Rs17.1 trillion.

A special federal cabinet meeting will be held before the budget presentation to approve the budget draft, including proposals for salary and pension increases for government employees. A raise of 7% to 10% is under consideration, though allied parties are pushing for a 15% increase due to inflationary pressures.

The proposed economic targets include a GDP growth rate of 4.1% and an average inflation rate of 8.4%. The tax revenue target is set at Rs15,267 billion, while non-tax revenue is projected at Rs2,768 billion. The federal PSDP is expected to stand at Rs1.1 trillion.

Major expenditures include Rs7,824 billion allocated for debt servicing and Rs2,665 billion for defense. The petroleum levy target has been proposed at Rs1,727 billion.

The budget is also expected to introduce Rs220 billion in new taxes and may bring cryptocurrency transactions into the tax net, with a proposed capital gains tax ranging from 10% to 30%. Amendments to the Income Tax Ordinance, including the addition of Section 37C, are under consideration.

The government may withdraw tax exemptions for former tribal areas and include various food items—such as infant formula, ghee, cooking oil, tea, sugar, and dry milk—under the third schedule, making retail price printing mandatory.

A fixed tax scheme for traders is also proposed, applying a 1% tax rate on businesses with annual sales up to Rs200 million, along with a Rs25,000 fixed filing requirement. Traders opting into the scheme would be exempt from audits.

Other proposals include ending tax exemptions on electric vehicle Completely Knocked Down (CKD) kits from July 1, 2026, and doubling the climate support levy on petroleum products from Rs2.5 to Rs5 per litre, potentially generating over Rs90 billion.