{"id":32805,"date":"2026-06-01T05:08:37","date_gmt":"2026-06-01T05:08:37","guid":{"rendered":"https:\/\/gsrra.com\/?p=32805"},"modified":"2026-06-01T05:08:44","modified_gmt":"2026-06-01T05:08:44","slug":"pakistan-fy2026-27-budget-expectations","status":"publish","type":"post","link":"https:\/\/gsrra.com\/?p=32805","title":{"rendered":"Pakistan: FY2026-27 budget: expectations"},"content":{"rendered":"\n

<\/a>The International Monetary Fund (IMF) reportedly approved the Pakistan budget for next fiscal year during a week-long staff visit (13 May to 20 May), and in a press release explicitly acknowledged that the mission\u2019s focus was on \u201crecent developments, reform implementation and the budget strategy for fiscal year 2027\u201d \u2013 external developments, including those related to the Middle East conflict, accounting for severe global supply shortages of oil, LNG, fertilizer, helium and other key minerals, were bizarrely deemed \u201ccontained\u201d for Pakistan.<\/strong><\/p>\n\n\n\n

The budget, expected to be announced this Friday, will, therefore, have few surprises for two reasons: (i) the third review of the Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF) documents were uploaded on the Fund website on 15 May \u2013 two days after the arrival of the mission to review the budget \u2013 detailing time-bound conditions and structural benchmarks agreed with the authorities till the next mandatory quarterly review scheduled for 15 September. The envisaged disbursement, subject to reaching a staff-level agreement, is 760 million SDRs under the EFF and 76.9 million SDRs under the RSF; and (ii) budget formulators typically disclaim responsibility for almost 75 to 80 percent of the budgeted allocations on the grounds that they are taken by the elite\/influentials and, when the country is on a Fund programme, by the IMF.<\/p>\n\n\n\n

The annual raise in total budgeted outlay is premised on a very optimistic projection of the Gross Domestic Product (GDP) growth rate. Post-Covid 19, except for 2021-22, the growth rate has been well below projections and, given that the country has been on a rigid upfront IMF programme since 2019, this has implied slashing the Public Sector Development Programme (PSDP) to meet the deficit targets agreed with the Fund. Sadly, this has been the practice during nearly all the Fund programmes. Pakistan is currently on the twenty-fourth programme, yet, over time, as was to be expected, the PSDP actual disbursement has been shrinking in terms of the percentage budgeted allocation \u2013 the July-April 2026 rate is at a low of 51 percent.<\/p>\n\n\n\n

The misalignment between the PSDP authorisations (by the Planning Ministry) and the actual disbursement (by the Finance Ministry) may indicate: (i) the Planning Ministry distancing itself from the lower disbursements than budgeted (though it is the Ministry\u2019s responsibility to present more realistic allocations, given the shrinking fiscal space); and\/or (ii) it may be an attempt to showcase the failure of the Finance Ministry to fund development and instead to continue to prioritise the outlay for current expenditure.<\/p>\n\n\n\n

The focus has remained on ensuring that the current expenditure requirements are met.<\/p>\n\n\n\n

The major component of this is the mark-up on loans budgeted at a little over 50 percent of the total current expenditure in 2025-26 \u2013 an outlay which, if not released, would have serious economic consequences. This is lower than what was realised in 2024-25 \u2013 at 54.5 percent \u2013 though it was budgeted at 56.8 percent of total current expenditure, with the difference in total terms being 813 billion rupees.<\/p>\n\n\n\n

The lower outlay for mark-up this year was not due to lower envisaged borrowing but lower borrowing costs \u2013 rescheduling past loans, which lengthened the period but lowered the actual interest payment and the anticipation of lower policy rate by December last year (a rate that had to be raised due to the Middle East conflict \u2013 so much for its effects remaining contained).<\/p>\n\n\n\n

In this context, it is relevant to note that the 1.25 trillion rupees borrowed from the 16 commercial banks to retire the circular debt was, after IMF approval, not included in the mark-up and defined as a one-off.<\/p>\n\n\n\n

In total terms, the budgeted mark-up in 2024-25 was higher by 829,666 billion rupees than what was realised at the end of the year due to a lower policy rate over the year as well as rescheduling.<\/p>\n\n\n\n

The budget documents for the next fiscal year, 2026-27, would indicate by how much this expenditure item exceeded the budgeted amount.<\/p>\n\n\n\n

Defence as a percentage of current expenditure was 15.62 percent of total current expenditure 2025-26, while last year it was at 13.3 percent (with the budgeted amount under this head lower by 2.3 percent).<\/p>\n\n\n\n

The rise may well be due to higher operational costs due to ongoing terror attacks; however, it is relevant to restate that the actual current expenditure as per budget documents for last year declined by 813 billion rupees.<\/p>\n\n\n\n

Running civilian government rose to 5.9 percent of total current expenditure in the current year\u2019s budget against 5.4 percent in last year\u2019s revised estimates due to massive pay rises at the taxpayers\u2019 expense.<\/p>\n\n\n\n

Pensions rose from 1.014 trillion rupees in the revised estimates of last year to 1.055 trillion rupees this year \u2013 money dedicated for public sector pensioners and does not include the 93 percent of those who are engaged in the private sector.<\/p>\n\n\n\n

While the government has made employee contributions mandatory from last year, yet greater clarity is required as to whether this amount is being set up in an escrow account or a pension fund, or whether money is fungible, the government is using it for meeting its expenses, which may have some consequences down the line.<\/p>\n\n\n\n

Benazir Income Support Programme (BISP) received less than 5 percent of the current outlay as per the Fund\u2019s insistence, though the beneficiaries that have been identified through a scientific method of selection do not constitute the rising number of unemployed as a consequence of the Fund\u2019s severely contractionary monetary and fiscal policies, nor take cognisance of the rising poverty levels through the calorific method.<\/p>\n\n\n\n

Revenue is to be generated from (i) raising indirect taxes (sales tax in particular) with the rationale that GST C-efficiency ratio (actual revenue collection from goods and services to potential) has declined from 27.4 percent to 22.8 percent over the past ten years.<\/p>\n\n\n\n

The Fund proposes taxing a broad set of basic goods that remain exempt or are concessionally taxed, historical zero-rating in export sectors has narrowed the base, and post-devolution fragmentation of GST on services has added compliance and administrative complexity through four separate provincial regimes; however, these are indirect taxes whose incidence on the poor is greater than on the rich, (ii) constitutional court ruled in favour of super tax; however, there is a concern that capital flight may be further fuelled; and (iii) increasing provincial taxes and most particularly agricultural income tax that must be taxed at the same rate as on the salaried. If implemented, this will have political ramifications.<\/p>\n\n\n\n

An out-of-the-box solution would be for the government to implement reforms in pensions (through employee contributions that would then be channelled into existing pensioners), a wage freeze for the next three years, budgeting only critical operational expenses, and realistic targets for the mark-up while focusing on creating honest taxpayers through implementing a tax structure that is fair, equitable and non-anomalous.<\/p>\n\n\n\n

Reference Link:- https:\/\/www.brecorder.com\/news\/40423330<\/a><\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The International Monetary Fund (IMF) reportedly approved the Pakistan budget for next fiscal year during a week-long staff visit (13 May to 20 May), and in a press release explicitly acknowledged that the mission\u2019s focus was on \u201crecent developments, reform implementation and the budget strategy for fiscal year 2027\u201d \u2013 external developments, including those related […]<\/p>\n","protected":false},"author":1,"featured_media":32806,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"aside","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[27954,29800,29799,483,27525,29801,29802,29803,29004],"class_list":["post-32805","post","type-post","status-publish","format-aside","has-post-thumbnail","hentry","category-sample-category","tag-budget-2","tag-expectation","tag-fy2026-2027","tag-pakistan-2","tag-price-hike-2","tag-reforms-in-tax-regime","tag-relief-to-public-2","tag-tax-xollection-targets","tag-taxes-2","post_format-post-format-aside"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/32805","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=32805"}],"version-history":[{"count":2,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/32805\/revisions"}],"predecessor-version":[{"id":32808,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/posts\/32805\/revisions\/32808"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=\/wp\/v2\/media\/32806"}],"wp:attachment":[{"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32805"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32805"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gsrra.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32805"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}