Islamabad, June 30, 2025 – President Asif Ali Zardari has formally signed the Finance Act 2025, which enacts the federal budget for the upcoming fiscal year with an allocation of Rs17.57 trillion, effective from July 1. The Presidential assent, issued on June 27 and notified in the official gazette, marks the final legislative step following parliamentary approval of the budget on June 26.
🔍 Key Highlights of the Finance Act
- Economic Targets: The Act forecasts 4.2% GDP growth and inflation of approximately 7.5% in the 2025–26 fiscal year.
- Revenue Projections: The Federal Board of Revenue (FBR) is expected to collect Rs14.13 trillion, supported by projected net revenues of Rs11.07 trillion and non-tax receipts of Rs5.15 trillion.
- Major Expenditures: Defence spending totals Rs2.55 trillion, the largest non-interest expense; debt servicing commands Rs8.2 trillion; pensions and subsidies are allocated Rs1.06 trillion and Rs1.19 trillion, respectively.
- Development and Infrastructure: A provision of Rs1 trillion is earmarked for the Public Sector Development Programme (PSDP), including key projects—Diamer‑Bhasha, Mohmand Dam, and K‑IV—alongside a Rs4 billion package for agriculture sector initiatives.
- Social & Salary Relief: Salaries and pensions have been raised by 10% and 7%, respectively. Income tax relief benefits salaried individuals and sets a Rs1.2 million annual income exemption threshold.
✅ Legislative Journey
- National Assembly Approval: The Finance Bill 2025 passed on June 26, unveiling the Rs17.57 trillion budget. Key provisions approved included a carbon levy of Rs2.50 per liter on petroleum and a 10% sales tax on solar panel imports to incentivize clean energy.
- Opposition Responses: While opposition parties sought further public consultations and modifications, most amendments were turned down. However, the PPP-supported exemption for income under Rs1.2 million and enhanced funding for BISP were secured.
📊 Implications & Reforms
- Fiscal Consolidation Push: Facing IMF targets under a $7 billion loan facility, Pakistan is reinforcing revenue collection through sales tax fraud penalties, digital invoicing systems, and anti-smuggling customs measures .
- Green Taxation: The Act introduces new environment-friendly levies, including the carbon charge, aligning with Pakistan’s climate commitments .
- Social Welfare Expansion: Enhanced allocations for BISP, pensions, and rural infrastructure reflect a continued focus on social safety nets and equitable growth .
🏗️ Implementation & Outlook
With implementation set for July 1, FBR and finance authorities are working to operationalize tax changes and ensure smooth roll-out. Critical early indicators to watch include:
- Tax compliance and collection trends amid new enforcement frameworks.
- Inflationary pressure from increased utilities, pensions, and subsidies.
- Progress on development projects, which could signal growth momentum.
- Market and investor confidence, influenced by fiscal discipline and reform signaling.
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