Government continues expenditure controls introduced in 2023 amid budgetary pressures
ISLAMABAD: The federal government has extended Pakistan austerity measures for FY2026-27 as part of efforts to control public spending and strengthen fiscal discipline amid ongoing budgetary challenges.
The Ministry of Finance issued a notification on July 21, 2026, confirming that the austerity measures approved by the federal cabinet will remain applicable throughout the new fiscal year across ministries, divisions, state-owned enterprises (SOEs), regulatory authorities and statutory bodies.
The measures were originally introduced in 2023 and further expanded in 2024 to reduce non-essential government expenditure and improve efficiency in public sector spending.
Austerity policy continues across government institutions
According to the Finance Division notification, the government will continue implementing three previously approved sets of expenditure-control measures.
These include directives issued by the Cabinet Division in February 2023 and additional restrictions introduced by the Finance Division in September 2024.
The Ministry of Finance said the continuation of these measures is aimed at ensuring responsible financial management and maintaining fiscal discipline under the Annual Budget Statement approved by the federal cabinet.
The restrictions will apply to all federal government departments, attached organisations, regulatory bodies and statutory institutions with necessary adjustments based on operational requirements.
SOEs directed to follow spending controls
The notification clarified that state-owned enterprises will also be required to implement the austerity measures.
For SOEs, the directives will be considered formal instructions of the federal government under Section 35 of the State-Owned Enterprises (Governance and Operations) Act, 2023.
The government expects these measures to help reduce unnecessary expenditure, improve resource utilisation and support broader economic reform efforts.
Austerity Committee empowered to grant exemptions
To ensure flexibility, the federal cabinet has authorised the Austerity Committee, established by the Finance Division, to approve relaxations from the prescribed measures on a case-by-case basis.
The committee will review requests submitted by government entities and determine whether exemptions are justified based on operational needs.
The Finance Division has directed all ministries and divisions to circulate the notification among their respective departments, autonomous bodies, corporations and state-owned enterprises for strict compliance.
The notification has also been shared with key federal institutions, including the Presidency, Prime Minister’s Office, National Assembly, Senate and Auditor General of Pakistan, for information and implementation.
Government focuses on fiscal discipline
The extension of Pakistan austerity measures FY2026-27 reflects the government’s continued focus on reducing unnecessary spending and managing fiscal pressures.
Officials said maintaining expenditure controls remains a key component of efforts to improve financial stability, enhance governance and support sustainable economic management.