Govt Unveils Rs18.8tr FY27 Budget With 4% Growth Target

ISLAMABAD: The federal government has unveiled a Rs18.771 trillion budget for fiscal year 2026-27, setting a 4% economic growth target as it seeks to shift the economy from stabilization toward sustainable expansion.

Finance Minister Muhammad Aurangzeb presented the federal budget in the National Assembly on Friday. The total outlay, rounded at Rs18.8 trillion, comes with a major revenue collection plan, continued pressure from debt servicing, a higher defence allocation and Rs1 trillion for federal development spending.

According to the budget documents, total resources and total expenditures have both been estimated at Rs18.771 trillion. The government has set the Federal Board of Revenue tax target at Rs15.264 trillion, while non-tax revenue has been estimated at Rs5.336 trillion.

Gross revenue receipts are projected at Rs20.600 trillion. After the provincial share of Rs8.848 trillion, net revenue receipts for the federal government are estimated at Rs11.751 trillion.

The federal budget deficit has been projected at Rs7.020 trillion. The overall fiscal deficit is targeted at 3.6% of GDP, while the government is aiming for a primary surplus of 2% of GDP.

Debt servicing remains the largest pressure point in the new budget. Interest payments have been estimated at Rs8.054 trillion, consuming a major share of federal expenditure and limiting fiscal space for development and public relief.

Current expenditure has been set at Rs17.495 trillion. Major allocations include Rs3 trillion for defence affairs and services, Rs2.680 trillion for grants and transfers, Rs1.169 trillion for pensions, Rs1.091 trillion for subsidies and Rs1.071 trillion for running the civil government.

The government has also kept Rs430 billion as provision for emergency and other requirements during the fiscal year.

Development and net lending have been estimated at Rs1.276 trillion. Of this amount, Rs1 trillion has been earmarked for the federal Public Sector Development Programme, while Rs276 billion has been allocated for net lending.

The 4% GDP growth target is higher than the estimated 3.7% growth for the outgoing fiscal year. The government has also set the inflation target at 8.2%, reflecting continued concern over prices, energy costs and external risks.

For salaried workers, the budget includes tax relief through revised slabs, though the basic monthly tax-free threshold of Rs50,000 remains unchanged. The government has presented the relief as part of an effort to support documented taxpayers while expanding enforcement in less-documented sectors.

The budget also signals a continued focus on revenue mobilisation, tax compliance and spending discipline. Policymakers are expected to rely heavily on higher FBR collection, controlled subsidies and fiscal coordination with provinces to meet deficit and primary surplus targets.

The budget will now be debated in parliament before approval of the Finance Bill. Once passed, the new fiscal measures will take effect from July 1, 2026.

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