Pakistan budget to hit middle class amid IMF pressure

Pakistan is set to unveil its new federal budget on Friday, featuring stricter fiscal measures that are expected to place a greater burden on salaried individuals

Pakistan is set to unveil its new federal budget on Friday, featuring stricter fiscal measures that are expected to place a greater burden on salaried individuals and formally registered businesses, as the government moves to raise revenue under International Monetary Fund (IMF) conditions.

According to policy outlines and media reports, Finance Minister Muhammad Aurangzeb will present a proposed 17.1-trillion-rupee budget for the fiscal year beginning next month. The plan reflects ongoing efforts to reduce fiscal deficits while maintaining support for low-income groups through targeted cash assistance.

Officials are under pressure to boost tax collection and meet austerity benchmarks linked to the IMF bailout program. As a result, higher fuel and electricity costs, along with additional taxation, are expected to primarily affect the documented economy, including salaried workers and corporate sectors.

Economists note that politically sensitive sectors such as agriculture, retail, and real estate continue to remain largely outside the formal tax net, limiting the government’s ability to broaden revenue sources. This imbalance is seen as a key structural challenge in Pakistan’s fiscal system.

At the same time, external pressures, including rising global oil prices and regional instability linked to tensions in the Middle East, have added further strain to Pakistan’s economy. Inflation has once again returned to double digits, complicating efforts to stabilize growth.

The government has set a growth target of 4.1% for the next fiscal year, slightly above current projections, while also aiming to bring inflation down. However, business confidence remains weak, with rising input costs and tighter monetary conditions affecting industrial output and employment.

Authorities have directed the Federal Board of Revenue to significantly increase tax collections, despite ongoing challenges in expanding the tax base. Analysts argue that the extensive informal economy continues to limit effective taxation, as only a small portion of the population contributes to income tax filings.

Experts warn that without meaningful reforms in under-taxed sectors, fiscal adjustments will continue to fall disproportionately on the formal economy, potentially widening public frustration with the state’s financial policies.

The budget is also expected to prioritize essential development spending cuts, while maintaining allocations for defense and internal security. Meanwhile, the government has yet to fully explain the delay in budget submission, though sources suggest ongoing discussions with the IMF over fiscal adjustments and provincial revenue contributions.