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Akistan’s economy can enter a new, potentially decisive, phase when Federal Finance Minister Mohammad Aurangzeb offers the annual budget for the financial year 2025-26 on June 10. Economic indicators are showing preliminary signs of stability, though structural risks still need practically policy intervention. The next budget is expected to explain the pace of economic reforms and public confidence, especially when the country seeks to balance financial sanctions with targeted relief measures.
Due to a significant decline in policy rates, the expected reduction in overall costs due to the relaxation of loan service costs offers a rare window to change its financial preferences. Budgeting will have deep implications for employment creation, inflation and investment recovery, and will also align not only for economic management but also for the formation of the national direction in the aftermath of adjustment.
At the end of the recent IMF staff’s visit to Islamabad, headed by Nathan Porter, identified a significant development in Pakistan’s economic roadmap. Discussions between the IMF and Pakistan reflected a strong alignment with financial stability measures, while ensuring the protection of social and preferential costs. Authorities confirmed their commitment to the additional budget target of 1.6 % of the GDP in FY 2026, indicating a clear intention to maintain financial discipline.
The IMF emphasized steps to enhance the revenue, especially by increasing the tax base and improving the compliance procedures. The integration of the priority of the targets and the strengthening of administrative capacity was identified as the key elements for the forward movement on the financial framework.
The IMF acknowledged the importance of anchoring the Central Bank’s mid-term target limits, which emphasized the continuity of financial policy depending on tight and data, and emphasized the need for foreign exchange reservoirs to reserve the reserve of foreign exchange to strengthen flexibility by external shocks.
The consensus during the mission reinforces the confidence of investors, which pave the way for financial support and technical cooperation between Pakistan and the IMF. The decision to complete the first review of the IMF Executive Board Extension Fund Facility (EFF) and approve Pakistan’s request for any management under flexibility and stability (RSF) identified a milestone in Pakistan’s reform journey.
Under the EFF, the total distribution from the supply of about $ 1 billion (SDR 760 million) reaches about $ 2.1 billion (SDR 1.52 billion), which provides significant support to the external account. The IMF also approved a request for an additional $ 1.4 billion access under Pakistan’s RSF, designed to stabilize the flexibility and stability of the climate.
The IMF’s Executive Board recommends meeting the seven quantitative performance standards for the end of December 2024, related to pure foreign exchange reserves, primary budget deficit, SBP forward book and cash transfer costs.
The structural standards that have been agreed include parliamentary approval of the budget for the fiscal year 2026 associated with the IMF’s targets, the implementation of agricultural income tax and the publication of the governance action plan by October 2025. Monetary and financial sector benchmarks include the development of the post -strategy and the development of the energy sector strategies and reforms in the energy sector.
The IMF program also requires legal amendments to ensure proper loan services and demands a national financial contract that promotes deviation and provincial discipline. Trade -related standards include presenting legislation to eliminate quantitative restrictions on imports of used vehicles by 2035 and to be out of privileges for special economic zones. The commitment to these reforms indicates the efforts of Pakistan’s stability to stabilize and transfer from flexibility.
Budgeting for the financial year 2025-26 is a rare opportunity for Pakistan to align a financial strategy with structural reforms and socio -economic change. The need to balance efficiency is important. The government should maintain its commitment with financial responsibility.
The IMF executive board has also emphasized that the funding is deposited in the central bank reserves and that they are not available to assist the budget. The government of domestic revenue production and spending is more responsible for the government.
The emphasis on climate -related reforms under the RSF expands the strategic scope of the program, and finances long -term stability goals such as energy transfer, water management and green infrastructure.
Budgeting for the fiscal year 2025-26 provides a rare opportunity to align the financial strategy with structural reform and socio-economic change. The need to balance efficiency is important. The government should maintain financial responsibility, while ensuring that the budget provides public aid, especially for the salaried class and weak families.
The proposed decline in high tax rates and the rational status of income tax brackets for middle -income individuals should also have solid investment in health, education and social protection. Identifying tax brackets in inflation can provide lasting relief to the salaried population while protecting the taxation of taxes. Instead of increasing the burden on taxpayers, a broader tax base should be obtained through implementation, digitalization and encouragement.
The defense should reflect the regional security environment allocated and Pakistan’s strategic needs without crowds in development costs. The recent rise of tensions in South Asia and the continued importance of national security justifies a strong but measured defense budget.
The government has to ensure that defense costs are effective, technological -based, and strategies in accordance with long -term modernization goals. The budget must protect important social programs, such as the unconditional cash transfer scheme, whose inflation adjustment is necessary to maintain the real purchase power for the poorest families.
Continuous support for the EHSAAS and Benazir Income Support Program, if properly targeted and digitally managed, can offer both financial performance and political legal status.
The Public Sector Development Program should give priority to high influence, scale projects that earn quick economic profit and generate jobs. The integration of climate flexibility in PSDP projects, especially in transport, water and renewable energy, can give Pakistan a position as a regional leader in sustainable development.
The budget will also focus on the reform of public -owned enterprises, the improvement of the transparency of the purchase and the digitalization of the revenue receipt system.
The Federal Board of Revenue will have to invest in large data analysis, blockchain-based invoices and AI-driving audit selection to stabilize compliance and minimize leakage. The incorporation of retail and informal sectors to the tax net through the tools such as the Tajir Dost Scheme and digital invoices such as legislation can unlock widespread unused taxes without legislation.
The monetary policy must be cautious and adaptable. Pakistan’s State Bank should continue to annest the expectations of inflation, supporting the credit flow to the private sector. The financial sector strategy should give priority to financing small and medium -sized businesses and expansion of Islamic banking to add banking to deepen financial access and flexibility.
The government should also maintain the market exchange rate and refrain from administrative intervention that distorts trade competition and reserve management. To protect the economy from external threats, reconstruction of foreign exchange reserves and restoration of credible forward books is essential.
The budget will need to clearly discuss the public, its actions and benefits. In order to enhance confidence and participation, the government will have to invest in budget literacy, citizens’ engagement and digital transparency tools. Citizens’ budget publishing, regular Town Hall meeting and public dashboards regarding the implementation of the budget can give rise to confidence and accountability. The budget statement should emphasize that reforms are not a burden but a strong, fast and more self -reliance.
The path to sustainable growth demands consistency, courage and explanation. The IMF -supported reform program provides a framework, but the national will and institutional capacity must be a result. Next year, not only to balance books but also to restore national ambitions for self -reliance and prosperity. It should begin a new economic agreement between the state and the public, based on an opportunity, equality and joint responsibility.
Dr. Ikram -ul -Haq, the author and the Supreme Court’s lawyer, is an affiliated teacher in the Lahore University of Management Sciences.
Abdul Rauf Shakuri is a corporate lawyer based in the United States.
