Finance Minister Muhammad Aurangzeb unveiled a Rs17.573 trillion federal budget on Tuesday, setting a GDP growth target of 4.2% – a sharp jump from this year’s 2.7%. The strategy, he claimed, is designed to overhaul the economy’s “DNA” by boosting productivity and exports. Inflation is projected at 7.5%, while the fiscal deficit is targeted at 3.9% of GDP, down from 5.9%.
The government aims for a primary surplus of 2.4% and has set an aggressive tax collection target of Rs14,131 billion – an 18.7% hike over the revised estimate. Non-tax revenue is expected to reach Rs5,147 billion. To meet these goals, the budget introduces strict tax and enforcement measures, projected to raise Rs 670 billion in additional revenue. Relief worth Rs58 billion – mostly benefiting salaried individuals – brings the net gain to Rs623 billion.
Major tax changes include: Increased withholding taxes on services, digital platforms, and e-commerce,18% GST on imported solar panels, New 10% GST on FATA/PATA, Higher taxes on interest income, cash withdrawals, and 850cc vehicles, New levies on high-income pensioners, Restrictions on property/vehicle purchases by non-filers
The budget was received with a mixed reaction from stakeholders of the economy, with some expressing cautious optimism over recent policy shifts, while others remain sceptical due to persistent structural challenges
Real estate too saw mixed changes: a 1.5% cut in purchase tax, higher seller taxes, and the abolition of FED on transactions. However, the budget was received with a mixed reaction from economic stakeholders. Some expressed cautious optimism over recent policy shifts, while others remained sceptical due to persistent structural challenges.
Pakistan’s Youth Left Behind?
The government’s Finance Bill 2025-26 came under sharp criticism from policy analysts and youth advocates for overlooking Pakistan’s largest demographic: its youth. Despite over 60% of the population being under 30-and more than two million young people entering the workforce annually-the finance bill lacks targeted fiscal incentives or employment programmes for youth.
While Finance Minister Muhammad Aurangzeb acknowledged the economic potential of young Pakistanis, citing $400 million earned by freelancers last year, critics argue the bill offers rhetoric over real relief. Measures such as tax breaks for private universities and digital reforms are seen as legacy policies or indirect enablers, falling short of addressing the pressing youth employment and skills crisis.
The PSDP allocation for the Higher Education Commission has also been slashed by over Rs21 billion, with no new funding for vocational training or entrepreneurship. Analysts warn that without tax breaks, startup incentives, or targeted hiring schemes, Pakistan risks alienating the very generation that could drive future growth.
“The lack of youth-focused fiscal planning shows a dangerous disconnect between policy and demographic reality,” said Dr Shafqat Chaudhary, a development analyst.
Muted Cheers from the Salaried Class
The federal budget for 2025-26 has offered nominal relief to Pakistan’s salaried middle class, with income tax cuts announced for individuals earning between Rs600,001 and Rs3.2 million. Finance Minister Muhammad Aurangzeb positioned the move as a step toward easing inflationary pressure and boosting take-home pay.
“We’ve reduced tax rates across all six slabs for salaried individuals,” the minister stated during the budget presentation.
However, salaried professionals remain unconvinced. The income tax exemption threshold remains unchanged at Rs600,000-falling short of the Salaried Class Alliance of Pakistan’s (SCAP) demand to raise it to Rs1.2 million. Critics argue the relief is marginal at best, especially when offset by increased taxes on banking and investment products.
“There’s no real gain when the government fails to widen the tax net and leaves sectors like agriculture and retail untaxed,” said a SCAP representative. The sentiment reflects a broader frustration: the salaried class continues to shoulder a disproportionate tax burden while structural reforms remain elusive.
Business Leaders Deliver Mixed Reactions to Federal Budget 2025-26
SCCI: Budget Not Business-Friendly Under IMF Conditions
The Sarhad Chamber of Commerce and Industry (SCCI) has strongly criticized the Federal Budget 2025-26, terming it disappointing and unaligned with the expectations of the business community. SCCI President Fazal Moqeem Khan stated at a post-budget press conference that the Chamber had hoped for a progressive, pro-business approach but was let down. “The government has missed an opportunity to support growth and revival of industries, particularly in conflict-hit regions like Khyber Pakhtunkhwa,” he said. Khan added that harsh IMF conditionalities make a truly business-friendly budget impossible and reiterated demands for specific relief for war-affected businesses in KP.
FPCCI: Balanced but Unrealistic Revenue Targets
In contrast, the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), led by its President Atif Ikram Sheikh, offered a cautiously optimistic response. While acknowledging certain positive steps-such as simplified tax return forms for salaried individuals and SMEs, and efforts to curb tax harassment-Sheikh criticized the Rs2,500 billion increase in the FBR’s revenue target as “unrealistic.” He also noted the budget offered “relief in some areas but completely ignored others,” especially the education and IT infrastructure sectors. Still, Sheikh described the abolition of duties on property transfers and the reduction in super tax as welcome moves, while urging greater focus on export facilitation and LSM revival.
KCCI: Budget Detached From Ground Realities
The Karachi Chamber of Commerce and Industry (KCCI), in tandem with the Businessmen Group (BMG), expressed strong reservations. BMG Chairperson Zubair Motiwala dismissed the budget as a “camouflage,” saying it lacks any real stimulus for industrial growth or exports. KCCI President Muhammad Jawed Bilwani went further, rejecting the budget outright. He lamented the absence of reforms to reduce electricity tariffs and interest rates-key factors, he stressed, that determine the cost of doing business in Pakistan. “Without reducing these costs, the economy can neither generate jobs nor attract investment,” Bilwani warned.
LCCI: Positive Elements Overshadowed by Missed Opportunities
The Lahore Chamber of Commerce and Industry (LCCI) acknowledged several positive measures, including relief for the construction sector and increased allocations for water projects. However, LCCI President Mian Abuzar Shad said broader expectations-particularly from SMEs and the agricultural sector-went unmet. Shad highlighted the problem of under-invoicing and Afghan trade leakages, estimating a Rs25 trillion loss over the past 15 years. He also supported taxation in FATA and PATA and welcomed efforts to simplify tax compliance. Still, he emphasized that the budget ignored key demands such as a reduction in local taxes, electricity tariffs, and more meaningful super tax relief.
UBG: Praise for Construction Relief, Criticism for Solar Panel Tax
United Business Group (UBG) Patron-in-Chief SM Tanveer appreciated incentives to the construction industry and the broader GDP growth agenda but criticized the imposition of an 18% sales tax on solar panels. He warned that such measures would deter green energy adoption and increase production costs for businesses already under stress.
OICCI: A Blow to Tax Equity and Investor Confidence
The Overseas Investors Chamber of Commerce and Industry (OICCI) expressed deep concern over the limited progress on tax reforms. While it welcomed the marginal reduction in super tax, the chamber said the broader tax structure remains skewed and fails to address Pakistan’s competitiveness. It flagged the government’s continued inaction on formalizing the Rs9 trillion informal economy and said the lack of consistency in tax policy is a deterrent for foreign investors.
P@SHA: Budget Is a ‘Threat’ to IT Industry
In a sharply worded statement, the Pakistan Software Houses Association (P@SHA) termed the budget a “stunning act of neglect” toward the IT sector. It criticized the government’s failure to provide a clear tax policy for remote workers and formal exporters. “This budget is not just a disappointment; it’s a threat,” the association said, warning that Pakistan’s most promising export sector is now at risk of collapse. P@SHA highlighted the absence of policy continuity, adding that $700 million in Digital FDI commitments now hang in the balance. The association reiterated its long-standing demand for a 10-year tax framework to support industry stability and talent retention, saying current policies promote capital flight and informal structures.
Business Forum: No Relief, No Vision
The Pakistan Business Forum (PBF) slammed the budget for ignoring agriculture and offering only token relief to businesses. “A pinch of salt in flour,” said PBF’s Ahmed Jawad, describing the minimal super tax reduction. He criticized the absence of tax base reforms and warned that the Rs14.1 trillion tax target could fuel inflation. Still, the forum welcomed the halving of regulatory duty and cuts in property-related taxes, calling it a rare positive shift.
PSX Cheers Budget: No New Shocks
In sharp contrast, the Pakistan Stock Exchange (PSX) surged to an all-time high, gaining 2,328 points, to break the 124,500 mark. Investors reacted positively to the absence of aggressive taxation and a softer-than-expected Capital Gains Tax regime. Market sentiment was lifted by IMF continuity, improving inflation trends, and hopes of interest rate cuts. Moreover, Brokerage firms in their market notes were unanimous in concluding that The Capital Gains Tax (CGT) framework, which was expected to tighten significantly, turned out to be more favourable than anticipated. They noted that this will potentially encourage mutual funds and institutional investors to redirect capital toward equities, potentially boosting market liquidity.
The writer is a journalist with experience across broadcast, print, and digital media.