Federal Finance Minister Muhammad Aurangzeb presented Pakistan’s 2025 budget, highlighting the government’s focus on economic stability and sustainable growth following the country’s response to recent geopolitical tensions. The budget aims to further stabilize the economy while ensuring the welfare of citizens.
Aurangzeb stated that remittances have increased to $31.2 billion and are projected to reach $37-38 billion by the end of the fiscal year. Economic growth has risen to 2.7%, while inflation has decreased to 4.7%. Fitch Ratings recently upgraded Pakistan’s rating to B-, and Moody’s has shown indications of improvement in the country’s economic outlook.
The Finance Minister also emphasized the importance of tax reforms. Pakistan’s tax-to-GDP ratio, previously at a low 10%, is being targeted for increase as a necessary step to strengthen the economy. A key measure in this effort is the introduction of digital integration between the economy and the tax system, which is expected to enhance efficiency and transparency.
“People, process, and technology are the three pillars of the new system,” said Usman Hanif, supporting the digital tax integration.
In a meeting chaired by Prime Minister Shehbaz Sharif, the federal cabinet approved an increase in the salaries of government employees.
According to reports, the federal cabinet also approved the budget proposals for the upcoming fiscal year.
Finance Minister Muhammad Aurangzeb briefed the cabinet on the budget during the meeting.
When asked by journalists about maintaining fiscal discipline after the budget, Muhammad Aurangzeb responded, “Inshallah.”
Sources indicated that the budget for the upcoming fiscal year may include a 6% increase in government employees’ salaries.
On the other hand, the federal government is considering reducing taxes on five-year-old vehicles in the upcoming 2025-26 budget to make imports more affordable.
Sources reveal that the government is reviewing proposals to ease customs and regulatory duties under the National Tariff Policy.
This includes phasing out additional customs duties and cutting regulatory charges. A reform in the Customs Act’s Fifth Schedule is also being considered to remove non-tariff barriers.
The government’s strategy aims to lower the average import tariff to below 6% by 2030, while also boosting competition in the domestic auto market.
Furthermore, the government is considering imposing excise duties on various everyday items in the upcoming 2025-26 budget, including fast foods, processed food, and beverages. The aim is to increase revenue and curb excessive consumption.
Items like chips, noodles, cold drinks, ice cream, biscuits, and frozen foods could see a 5% excise duty. Proposals also include applying an 18% sales tax on online shopping and e-commerce, bringing digital platforms into the tax net.
