Karachi, May 29, 2025 — As the countdown begins for the presentation of Budget 2025-26 on June 10, economic analysts anticipate a challenging fiscal blueprint aimed at aggressive revenue mobilization amid low inflation and sluggish GDP growth.
According to Insight Securities Limited, the upcoming budget will likely include significant tax measures to achieve the Federal Board of Revenue’s (FBR) ambitious target of PKR 14.3 trillion—an increase of approximately 16% year-on-year from the revised FY25 target of PKR 12.3 trillion.
The government faces an uphill battle in balancing its budget objectives with economic realities. With inflation projected to remain modest at 6.4% and GDP growth expectations dampened, revenue expansion through organic economic activity appears limited. Consequently, the burden has shifted toward structural tax reforms and the imposition of new levies to meet fiscal targets.
A key priority in the budget is the achievement of a primary surplus through strict expenditure control and the introduction of revenue-enhancing strategies. IMF oversight continues to exert pressure, curbing spending on low-priority projects and demanding rationalization of overall government expenditures. As such, the upcoming budget is expected to reflect a disciplined approach, focusing more on sustainability than populism.
Among the key proposed measures is the introduction of a tax on pensioners receiving over PKR 400,000 per month, potentially contributing billions to the exchequer. The government is also set to abolish the non-filer category, barring these individuals from conducting high-value economic transactions such as vehicle and property purchases.
The FY26 budget may also introduce a health tax of around 20% on processed foods and sugary beverages, a measure proposed by the Ministry of Health to raise revenue while discouraging unhealthy consumption habits. Similarly, the Petroleum Development Levy (PDL), currently at PKR 78 per litre on motor spirit and high-speed diesel, is expected to remain a vital revenue tool, especially amid declining global oil prices. A carbon tax is also under discussion.
Taxing agriculture income—a longstanding issue—is likely to be addressed through provincial budgets, while the government is also mulling a framework to tax income generated from social media platforms such as YouTube.
On the flip side, relief for the salaried class could come in the form of a higher withholding tax threshold, potentially raised from PKR 50,000 to PKR 100,000 per month. However, any such measures will have to be carefully balanced against IMF conditions.
The budget also includes sector-specific implications. In the energy sector, there is hope for the rectification of sales tax anomalies to support refinery upgrades. For the fertilizer sector, a doubling of the Federal Excise Duty (FED) from 5% to 10% is under consideration, along with a possible reintroduction of standard GST rates—moves that could impact farmer demand and agrarian economics.
In the automobile industry, a potential increase in the allowable age for imported used vehicles and higher withholding taxes on cars above 1300cc are being discussed. These changes, along with the removal of the 2% Additional Customs Duty (ACD) on parts, are expected to affect both local manufacturers and consumers.
The upcoming budget is also expected to address construction and allied industries by launching a subsidized housing scheme and possibly ending long-standing tax exemptions for the FATA/PATA regions. A ceiling of PKR 1 trillion for PSDP is anticipated for FY26, though actual spending may fall short due to fiscal constraints.
In the IT sector, stakeholders have urged the extension of the concessional Final Tax Regime (FTR) and reforms to eliminate double taxation on export-linked transactions. Meanwhile, changes in excise duties on tobacco and beverage products are also likely.
With budgetary reforms on this scale, the 2025-26 budget could set the tone for a new fiscal direction. While the short-term impact on markets may be neutral, the broader macroeconomic policy—crafted under IMF guidance—could strengthen long-term investor confidence and economic resilience.