KARACHI – Pakistani government unveiled its much-awaited budget for fiscal year 2025-26 with a sharp cut in overall expenditures in what is said to be a shift towards austerity and improved financial management.
As per official budget documents, total federal expenditure has been slashed from Rs 18,877 billion in 2024-25 to Rs 17,573 billion for 2025-26, which is a considerable reduction of Rs 1,304 billion – one of the largest YoY spending cuts in recent years.
The most prominent cuts are in current expenditure, which has been lowered from Rs 17,203 billion to Rs 16,286 billion, and development spending, which drops from Rs 1,400 billion to just Rs 1,000 billion. The government has signaled that these cuts are part of a broader reform strategy to trim wasteful spending, reduce reliance on debt, and align priorities with available fiscal space.
Budget 2025-26 speaks of the government’s commitment to responsible spending while safeguarding critical sectors, as these efforts have been made to protect social safety nets and essential services despite the spending curbs.
The cut in expenditures, along with a projected increase in revenues, resulted in projected budget deficit of Rs 6,501 billion, down from Rs 8,500 billion in the previous FY. As a percentage of GDP, the deficit is expected to narrow from 5.9% to 5.0%, easing pressure on the government to borrow heavily from domestic and international sources.
On the revenue side, the Federal Board of Revenue (FBR) has been tasked with collecting Rs 14,131 billion, up from Rs 12,970 billion last year — an increase of over 10%. Non-tax revenues are also projected to rise, contributing to a net federal revenue of Rs 11,072 billion. Despite the growth in revenue, the government has opted to pursue a leaner budget strategy, emphasizing fiscal consolidation and efficiency over expansive public spending.
While expenditure cuts may help ease fiscal pressures, financial experts caution that lower development spending could impact growth and public sector investment in the short term.
The budget will now be debated in Parliament, where further adjustments may be proposed in line with political and economic considerations.
Pakistan govt set to present Rs17.6tr budget for 2025-26 on Tuesday
