Every June, Pakistan’s federal government presents its budget for the coming year. It decides how much tax people and businesses will pay, how much the government will spend, and how much it will borrow. This guide explains how the budget works in plain language.
What is the federal budget?
The budget is the government’s financial plan for one fiscal year. In Pakistan the fiscal year runs from 1 July to 30 June. So a budget presented in June 2026 covers July 2026 to June 2027, and is usually called the budget for FY2026-27 (or FY27).
Who prepares and approves it?
- Preparation: the Finance Division works for months with ministries, the Federal Board of Revenue (FBR) and the Planning Commission to estimate income and spending.
- Presentation: the Finance Minister presents the budget in the National Assembly, usually in early or mid-June, in a speech that announces new taxes, relief measures and spending plans.
- Debate: members of the National Assembly debate the proposals. The Senate can review the Finance Bill and send recommendations, but under the Constitution it cannot block a money bill.
- Approval: the National Assembly votes on the Finance Bill and the spending demands of each ministry, normally before 30 June, so the new budget can take effect on 1 July.
Where does the money come from?
- Taxes collected by the FBR: income tax (direct tax), and indirect taxes such as sales tax, customs duty and federal excise duty.
- Non-tax income: such as the petroleum levy, profits from the State Bank of Pakistan, and fees and charges.
- Borrowing: when spending is higher than income, the gap (the fiscal deficit) is covered by loans from local banks and foreign lenders.
Where does the money go?
- Interest on debt: repaying interest on past loans is now the single biggest expense in Pakistan’s budget.
- Defence: the armed forces and national security.
- Development (PSDP): the Public Sector Development Programme pays for roads, dams, hospitals, schools and other projects.
- Pensions, subsidies and grants: including support for the power sector and social programmes such as the Benazir Income Support Programme (BISP).
- Running the government: salaries and day-to-day costs of federal ministries.
What about the provinces?
Under the National Finance Commission (NFC) Award, a large share of federal tax revenue is transferred to the four provinces. Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan then present their own budgets in their provincial assemblies, mainly covering health, education, police, local roads and agriculture.
How does the budget affect ordinary people?
- Salaries: changes to income tax slabs decide how much tax is deducted from your pay.
- Prices: changes in sales tax, customs duty or the petroleum levy can make everyday goods, fuel and imported items cheaper or more expensive.
- Government employees and pensioners: pay and pension increases are usually announced in the budget.
- Businesses: new tax rates, exemptions and incentives affect investment and jobs.
Why does the IMF matter?
When Pakistan is in an International Monetary Fund (IMF) programme, the budget usually has to meet agreed targets, such as collecting more tax, reducing subsidies and keeping the deficit under control. This is why IMF talks often get a lot of attention in the weeks before the budget.
Key terms in one place
- Fiscal deficit: the gap between government spending and income, covered by borrowing.
- Finance Bill: the law that puts the budget’s tax measures into effect.
- PSDP: the federal development budget for projects.
- Mini-budget / supplementary budget: extra tax or spending measures announced during the year.
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