Government shifts from stabilization to expansion with tax cuts, digital reforms, and investment-driven economic strategy
Federal Finance Minister Muhammad Aurangzeb has presented Pakistan’s federal budget for fiscal year 2026–27 in the National Assembly of Pakistan, announcing a massive outlay of Rs18.771 trillion aimed at steering the economy from stabilization toward long-term, investment-led growth.
The budget, described as relief-oriented, marks the government’s third financial plan under the current administration of Prime Minister Shehbaz Sharif. It comes amid ongoing regional tensions and global economic uncertainty, while building on gains achieved through two years of fiscal consolidation and structural reforms.
Aurangzeb highlighted that Pakistan has achieved macroeconomic stability, with GDP growth recorded at 3.7%, manufacturing rising 6.1%, and services expanding 4.1%. Inflation has eased significantly, averaging 4.5%, while foreign exchange reserves have strengthened to $17 billion.
The finance minister said the new fiscal framework focuses on export expansion, industrial modernization, and digital transformation. He noted that the economy has expanded to $452 billion, per capita income has increased, and investor confidence has improved due to policy consistency and financial discipline.
On the taxation front, the budget introduces substantial relief for salaried individuals, with reduced income tax rates across multiple slabs. The super tax on medium and large businesses is also being reduced or abolished in certain categories, while exporters receive additional relief measures to enhance competitiveness.
To support the property and construction sector, withholding taxes on property transactions have been significantly reduced. The IT sector’s concessional tax regime has been extended, while digital payments and fintech adoption are being promoted through lower transaction taxes.
The government also announced expansion of digital infrastructure, including increased use of electronic payments, automation in tax systems, and broader financial inclusion efforts. Agricultural support will continue through subsidized digital loan schemes for small farmers.
Further reforms include privatization of state-owned enterprises, tax base expansion through simplified retail taxation, and incentives for manufacturing and export industries. Duties on select imports and luxury vehicles have been revised, while essential industries such as pharmaceuticals receive targeted relief.
Aurangzeb emphasized that these measures aim to ensure inclusive growth, improve fiscal discipline, and strengthen Pakistan’s long-term economic outlook despite global challenges.
