News Desk, Syed Ali Shah:Â
Islamabad, June 10, 2025 —In a budget that blends relief with reform, Finance Minister Muhammad Aurangzeb unveiled the federal budget for FY 2025–26, announcing a 10% salary increase for government employees, a 38% cut in electricity tariffs, and a crackdown on Rs13 billion in tax fraud using AI-based systems. The budget, presented in the National Assembly on Tuesday, aims to stabilize the economy while strengthening tax compliance and energy sector efficiency.
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Aurangzeb outlined key economic indicators showing recovery, with remittances reaching $31.2 billion (expected to rise to $37–38 billion), inflation dropping to 4.7%, and GDP growth at 2.7%. He also emphasized that no new taxes are being imposed and dismissed speculation about a mini-budget.
During his budget address, the finance minister noted significant economic progress, including a surge in remittances to $31.2 billion, with projections indicating they could reach $37–38 billion by the close of the fiscal year. He stated that Pakistan’s GDP growth stands at 2.7%, while inflation has dropped to 4.7%, marking a notable improvement in economic indicators.
Aurangzeb also pointed to enhanced international confidence, referencing Fitch’s upgraded rating of Pakistan to B- and Moody’s recent positive economic outlook. These developments, he said, reflect growing investor trust in the country’s financial direction.
Major Tax Reforms & Digital Integration
The minister outlined sweeping reforms in the country’s tax structure, aiming to boost Pakistan’s historically low tax-to-GDP ratio, which has hovered around 10%. The integration of digital technologies into the tax system is expected to significantly enhance transparency and operational efficiency.
He revealed that artificial intelligence tools have been deployed to improve tax compliance and uncover fraudulent activities. To date, the government has blocked fake tax refunds amounting to over Rs9 billion and is investigating additional suspicious claims totalling Rs13 billion.
Starting July 1, 2025, the government will roll out simplified tax return forms for salaried individuals, streamlining the filing process to encourage wider compliance.
Aurangzeb also dismissed speculation about a mid-year mini-budget, clarifying that no additional taxes have been introduced.
Power Sector Reforms and Energy Initiatives
In a major move to address longstanding issues in the energy sector, electricity tariffs have been slashed by 38%, and inefficient power plants with a combined generation capacity of 3,000 megawatts have been decommissioned.
The finance minister highlighted significant cost savings, including a Rs140 billion reduction in transmission losses. Furthermore, plans are underway to privatize three electricity distribution companies as part of broader reforms aimed at increasing sectoral efficiency.
Efforts to establish a competitive electricity market are in progress, with new legislation for the National Electric Power Regulatory Authority (NEPRA) expected to be tabled within the next three months. Additional measures to adjust electricity tariffs further are also being planned.
In the oil and gas sector, recent discoveries of hydrocarbon reserves are expected to bolster Pakistan’s energy security, with the government accelerating exploration and development efforts.
IMF Endorsement and Revenue Gains
Aurangzeb noted that the International Monetary Fund (IMF) has acknowledged the government’s improved revenue enforcement measures, which have generated Rs389 billion. These efforts include legal reforms and enhanced compliance mechanisms.
The 2025–26 budget, according to the finance minister, reflects a clear shift toward responsible governance, economic modernization, and long-term fiscal discipline.
