KARACHI: Finance Minister Muhammad Aurangzeb presented Pakistan’s federal budget for fiscal year 2026-27 on Friday, targeting 4% GDP growth and projecting inflation at 8.2% as the government walks a tightrope between macroeconomic stability and rising regional tensions.
The government’s third annual budget totals approximately 18.77 trillion rupees ($67.5 billion), a modest increase from the previous year’s 17.6 trillion rupees. Debt servicing remains a substantial burden, with 8.054 trillion rupees allocated for interest payments in FY27.
According to budget documents, the government expects GDP growth of 4% in the coming fiscal year, up from an estimated 3.7% in the outgoing year. Inflation is projected at 8.2%, compared with 7% in FY26, while the budget deficit is forecast at 3.6% of GDP. The government aims to achieve a primary surplus of 2% of GDP.
In his opening address, Aurangzeb praised the role of Pakistan’s armed forces, noting the defense sector has become a source of valuable foreign exchange. He called a recent strategic defense agreement with Saudi Arabia “a moment of pride.”
“Pakistan will always steadfastly stand alongside KSA,” Aurangzeb said.
The finance minister also announced that the government is easing public investment in government schemes through telecom digital wallets, with a related project set to launch within one to two weeks.
The budget was originally scheduled for release on June 10 but was revised to Friday.
The fiscal plan arrives as Pakistan continues operating under a multi-billion-dollar IMF program that demands sustained fiscal discipline, tax base expansion, reduced untargeted subsidies and improved revenue collection. Meanwhile, escalating U.S.-Iran tensions add uncertainty to global energy markets, raising concerns about oil prices and import costs for the energy-dependent nation.
The government said it is closely monitoring Middle East developments, warning that prolonged disruption to regional trade routes could hurt Pakistan’s external account and inflation outlook.
Financial markets responded positively to expectations of a growth-oriented budget. The KSE-100 index closed nearly 2,700 points higher.
On Thursday, the government released the Pakistan Economic Survey for FY2025-26, which put GDP growth at 3.7% in the outgoing fiscal year, higher than the previous year’s 3.18% but below the 4.2% budget target.
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“The improvement owes to effective macroeconomic management, better fiscal account, growth in the large-scale manufacturing sector, resilience of the agriculture sector to floods of 2025, exchange rate stability and reforms under the IMF Extended Fund Facility Programme,” the survey said.
