Home Economy Finance Minister Aurangzeb presents Rs18.9tr federal budget ‘in line with IMF guidelines’

Finance Minister Aurangzeb presents Rs18.9tr federal budget ‘in line with IMF guidelines’

16 min read

ISLAMABAD: Finance Minister Muhammad Aurangzeb on Wednesday presented his first federal budget with a total outlay of Rs18.9 trillion, which analysts say is broadly “in line with IMF guidelines”.

Pakistan’s budget for the upcoming year aims for a modest 3.6 per cent GDP growth, and sets an ambitious Rs13tr tax collection target, raising taxes on salaried classes and removing tax exemptions for the rest.

Aurangzeb, during the budget presentation, said that the goal was to widen the tax base to avoid burdening existing tax payers.

This year’s budget, like last year’s, is widely considered to be crafted to align with the International Monetary Fund’s (IMF) requirements to secure another bailout, this time “larger and longer”.

Mohammad Sohail, chief executive of Topline Securities, told Dawn.com after the budget presentation concluded that the budget will help in fiscal consolidation and “is broadly in line with IMF guidelines”.


  • Total expenditure estimated to be Rs18.9tr
  • Ambitious Rs13tr tax revenue target set for FBR
  • Non-tax revenue target of Rs3.5tr
  • Aims to secure Rs30bn from privatisation
  • Expects debt servicing of Rs9.8tr
  • Petroleum levy increased by Rs20 on petrol and dieselRs25 on superior kerosene oil, light diesel and high-octane, e-10 gasoline
  • Targets 3.6pc GDP growth for 2024/25
  • Budget deficit projected at 6.9pc of GDP
  • Imports of raw materials used in solar panels, inverters and lithium-ion batteries manufacturing have been zero-rated

The finance minister thanked Prime Minister Shehbaz Sharif, PML-N chief Nawaz Sharif as well as various other leaders of the coalition government for their guidance in preparing the budget.

“Dear speaker, I think that despite political and economic challenges, our progress on the economic front in the past one year has been impressive,” Aurangzeb said.

He urged Pakistan to capitalise on a fresh opportunity to revitalise its economy.

“Pakistan has another opportunity to improve itself and embark on the path of economic development. I request everyone not to waste this chance,” Aurangzeb said.

The finance minister hailed the government’s efforts to address economic challenges and pledged to accelerate development under the leadership of PM Shehbaz.

“Before presenting the budget, I want to highlight our journey thus far,” the minister said. “Under Prime Minister Shehbaz Sharif’s leadership, we have pursued a homegrown agenda that has enabled us to overcome current economic challenges and boost the pace of development.”

Aurangzeb acknowledged the challenges faced by Pakistan’s economy, which had been struggling with depleted foreign reserves, a 40 per cent depreciation of the rupee, stagnant economic growth, and soaring inflation that pushed citizens below the poverty line.

He commended the government for securing a crucial nine-month IMF programme in June 2023, which helped Pakistan avoid economic collapse.

“The previous IMF programme was ending, and a new deal was essential to prevent a default. I commend Shehbaz Sharif’s government for their efforts in securing the programme,” he said.

Aurangzeb highlighted the significant improvement in economic indicators, crediting the PM and his team for their efforts. “Inflation stood at 11.8pc in May, a notable achievement considering the challenges. We’re on the right track, and inflation is likely to decrease further in the coming days,” he said.

The minister spoke of a significant turnaround in Pakistan’s economy, with foreign exchange reserves bolstered and international investors showing keen interest in investing in the country.

Key points from tax policy

  • Expand the tax base to enhance the tax-to-GDP ratio
  • Documentation of the economy through digitisation
  • Progressive taxation regime to increase burden on high earners
  • Increase in transaction taxes for non-filers
  • Protect vulnerable segments from impact of inflation

“Pakistan’s foreign exchange reserves have been strengthened, and international investors are now seeking opportunities to invest in our economy,” Aurangzeb said, highlighting the improved economic outlook.

He applauded the State Bank’s decision to cut interest rates, citing visible efforts to combat inflation. “The State Bank’s interest rate cut is a significant move, and the efforts to curb inflation are evident. Shehbaz Sharif and his team deserve congratulations for their commendable efforts to turn the economy around,” Aurangzeb said.

“These achievements are not ordinary. As a result of these, the country has exited a difficult time.”

The minister emphasised the need for patience and collective efforts to achieve sustainable economic development, cautioning that progress cannot be accelerated overnight.

Aurangzeb called for prioritising the private sector’s growth, acknowledging its crucial role in revitalising Pakistan’s economy.

“It’s time to give primary importance to the private sector in our economy,” Aurangzeb said.

Aurangzeb identified structural factors as key to addressing Pakistan’s economic imbalance, stressing the need to boost investment, economic output, and exports.

“We’re facing an economic imbalance, but structural factors like investment, economic output, and exports can help address this challenge,” Aurangzeb said, as he outlined a path forward for economic stability.

He said like most modern economies, we also need to keep in mind privatisation and regulatory reforms. The state should limit itself to essential public services only.

“To improve productivity, domestic and foreign investment should be encouraged,” he said.

Total budget outlay

The federal budget for fiscal year 2025 has a total outlay — the sum of expenditures and net lending of funds — of Rs18.877 trillion, representing a 30pc increase from the previous year’s budget.

Current expenditure

The government has proposed Rs17,203 billion for current expenditure in the FY25 budget, a substantial 29pc increase from the previous year. Interest payments, or debt servicing, have surged 34pc to Rs9,775 billion, consuming more than half of total budget outlay and becoming, like last few years, the government’s single largest expense.

Of that, defence expenditure constitutes Rs2,122bn, 17.6pc higher than last year’s budget, making up 1.71pc of GDP, largely unchanged from last year.

Federal revenue

Pakistan’s total revenue for fiscal year 2025 is budgeted at Rs17,815 billion. After accounting for provincial transfers of Rs7,438 billion, the net revenue stands at Rs10,377 billion, representing a significant 48.7pc increase from the previous year.

FBR tax target

Aurangzeb highlighted the urgency of tax system reforms, citing Pakistan’s lagging tax-to-GDP ratio compared to other countries.

“The prime minister is closely monitoring the digitalisation of tax policies and FBR’s administrative reforms. Our goal is to broaden the tax net without burdening existing taxpayers,” Aurangzeb said.

Mohammad Sohail, chief executive of Topline Securities, says the tax collection target is high, but “we believe that considering new taxation measures, Pakistan may be able to reach closer to the primary and fiscal deficit estimates”.


Aurangzeb expressed the government’s commitment to tackling inflation, a top priority, and noted significant progress in reducing price pressures.

“Inflation had surged to 38pc a year ago, with food inflation reaching 48pc, causing hardships for low-income households. I’m pleased to report that our improved economic strategy has successfully brought inflation down,” Aurangzeb said.

“In May 2024, the Consumer Price Index stood at 11.8pc and food inflation at 2.2pc. We’ve worked tirelessly to bring inflation into single digits and will sustain our efforts to ensure price stability,” Aurangzeb said.

Faisal Mamsa, the chief exectuve of financial consultancy firm Tresmarck, told Dawn.com that inflation projections of “12pc are realistic and achievable”.

“This can imply an average policy rate of 16pc,” Mamsa said.

PSDP allocation

The government has allocated Rs3,792.2 billion for the Public Sector Development Programme (PSDP) in FY25, a 40pc increase from last year’s Rs2,709 billion.https://e.infogram.com/054fe0c8-0aa8-4318-b2be-1441a16f2058?parent_url=https%3A%2F%2Fwww.dawn.com%2Fnews%2F1839433%2Ffinance-minister-aurangzeb-presents-rs189tr-federal-budget-in-line-with-imf-guidelines&src=embed#async_embed

The federal PSDP, which comes under this head, has received a boost with an allocation of Rs1,696 billion, representing a 47.5pc increase from last year’s Rs1,150 billion.

Provincial PSDP allocation, on the other hand, has risen 34.4pc to Rs2,095 billion, up from Rs1,559 billion in the previous year.

‘Hard work needed’

“There is a need for patience and extreme hard work, combined with homegrown corrective plans. The public must work together with institutions to achieve our economic goals,” Aurangzeb said, once again stressing the importance of collaboration and sustained efforts.

Aurangzeb emphasised the need for Pakistan to transition from a government-controlled economy to a market-driven economy, aligned with global standards, to boost exports and foster a savings-and-investment-based economy.

“We must shift from a government-determined economy to a market-driven economy, aligning our economic system with global standards, increasing exports, and promoting a savings-and-investment-based economy over a consumption-based one,” Aurangzeb said.

He highlighted the importance of considering equity and inclusion when implementing economic reforms, urging bold measures to ensure a more equitable economic system.

“When introducing economic reforms, we cannot ignore equity and inclusion. Bold measures are necessary to create a more inclusive economic system,” the minister said.

Earlier, the session commenced with the recitation of the Holy Quran and the national anthem.

Prime Minister Shehbaz Sharif and Deputy Prime Minister Ishaq Dar — Aurangzeb’s predecessor — are attending the session.