What is Pakistan’s Federal Budget for 2025-2026?
To run the federal government for the year 2025-2026, a budgeted (expense) amount of $62B* would be required. This is almost similar to last year**.
How will the money be spent?
Almost half of the expense is paying off the interest on past loans. Of these interest payments, the vast majority, i.e. 88%, are used to servicing local debt such as the ones taken to meet the deficit through certificates, bonds and other similar financial tools. External loans interest pay-offs are adjusted with the release of new loans. More in detail on that in revenue & deficit-funding.
Ninety-four percent of the budget money is spent on expenditures listed below:
The reminder $ 3.7B (6%) is spent in Public Order and Safety Affairs (2%), Net (provincial) lending (1.6%), Economic affairs (1.4%), Education (0.6%), Health (0.2%), Recreation (0.1%), Housing (0.1%) & Environment (0.02%).
This sum of expenditures is detailed in several ways in the budget document. Some categories are more transparent than others, but information is accessible, nonetheless. Having seen top line budget expense items, let’s move to sources of income that will help meet these.
Where will the money come from?
Sixty-three percent of the $62B are covered by the federal share of the tax and non-tax revenue i.e. $39B. The reminder is deficit. The shortfall of $23B is budgeted to be met through various means including public debt, selling off government assets, through local bank borrowing and external borrowing.
Tax and Non-Tax Revenue
Last year, 2024-2025, the Federal government reported revenue collection of $59B, this was 94% against budgeted. This year's budget for revenue collection is set at $68B. This is 15% growth versus actual reported collection of 2024-2025. The Federal government returns 42% of this amount to provinces, and reminder 58% i.e. $39B goes towards the Federal government's revenue.
Of the total $68B revenue, over 3/4th comes from tax revenue streams and remainder comes from non-tax revenue streams. The tax revenue is predominantly supported by income tax and sales tax. The non-tax revenue is carried by SBP profit receipts and petroleum levy. The below chart details the sources of collection of tax and non-tax revenues.
Financing of the deficit
The deficit of $23B is budgeted to be met through borrowing and selling, primarily. Ninety-seven percent of the deficit is set to be met via national borrowing; bank & non-bank. External loans contribute barely towards deficit fulfillment. Below table shows the deficit financing sources:
When a new external loan is issued, the interest of the previous debt is deducted first. Technically, the federal government will receive external loans of $20B for the year 2025-2026, but 98% of that amount will be used to pay the interest on the already accumulated debt. Less than 2% is budgeted to meet the deficit and enter the economy.
Budget Summary
Budget is an ‘estimate of income and expenditure for a set period of time’. The Federal budget estimates an expenditure of $62B, income of $39B and borrowing of $23B, for fiscal year 2025-2026.
The above text is an overview of the budget document. This budget document kicks off provincial budgeting, grants to administrative units and essentially it should get everyone to work. Read the full official budget report here.
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* PKR 17,573 billion converted to July USD - PKR avg exchange rate
** 2024-2025 actual budget was $61B, this is 92% versus planned budget for 2024-2025.
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