The Pakistan Peoples Party (PPP), a major coalition partner, has called for this increase to be raised to 10%, either at the budget announcement or during its parliamentary approval for the 2025–26 fiscal year. This request has also been communicated to the IMF for their review.
The Ministry of Finance has developed several proposals to present to the federal cabinet, led by Prime Minister Shehbaz Sharif, for final approval on June 10, 2025, before the budget is unveiled.
These options include the suggested 5% to 7.5% raise, reflecting the easing inflation in the current fiscal year. The ministry has also calculated the financial implications of these increases to share with the cabinet.
For salaried taxpayers, reductions in tax rates across various income brackets are being considered. Additionally, freelancers earning income abroad may be brought under the tax net, with the State Bank of Pakistan (SBP) assisting in tracking foreign transactions.
There is a proposal to introduce a 30% Disparity Allowance for civilian employees in grades BS-1 to BS-16. Furthermore, two ad-hoc allowances, previously excluded from the Basic Pay, are being reviewed, with the likelihood that one will be incorporated into the basic salary structure.
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The federal budget for 2025–26 is expected to be Rs17.5 trillion, down from Rs18.87 trillion last year, mainly due to reduced non-tax revenues, especially from the SBP, following lower policy rates. Non-tax revenues are forecasted to drop from Rs4.85 trillion to between Rs3 and Rs3.5 trillion.
On the spending side, debt servicing—the largest budget expense—is anticipated to decrease from Rs9.775 trillion in last year’s initial estimates to Rs8.1 trillion in the new budget. Meanwhile, the Federal Board of Revenue (FBR) has been assigned a revenue target of Rs14.14 trillion for the next fiscal year, up from the current year’s revised estimate of Rs12.33 trillion.
A rationalisation of import tariffs is expected, which may cause a revenue shortfall of Rs150 billion to Rs200 billion next year. Industries like steel, auto parts, and tiles are likely to be most affected due to their high input costs.
