The Finance Division has formally launched preparations for the federal budget for fiscal year 2026-27 by issuing the Budget Call Circular (BCC), setting macroeconomic priorities, a detailed budget timeline, and an expanded framework for climate and disaster budgeting, while projecting GDP growth at 5.1 percent and inflation at 6.5 percent for the next fiscal year.
Alongside the BCC, the government released its provisional macroeconomic framework, which projects GDP growth to rise to 4.0 percent in FY2025-26 and further to 5.1 percent in FY2026-27, with inflation expected to ease to 6.1 percent and 6.5 percent, respectively, supported by moderating global commodity prices and structural reforms.
The new instructions, circulated to all ministries and Principal Accounting Officers (PAOs), require federal entities to identify, classify and tag revenues and expenditures with climate and environmental relevance while submitting FY2024-25 actuals, FY2025-26 revised estimates and FY2026-27 budget estimates.
For the first time, the BCC introduces detailed guidance on green components of both tax and non-tax revenues, climate-linked subsidies and disaster budgeting, aimed at aligning fiscal policy with climate resilience and sustainability objectives.
Officials said strengthened tagging of revenues, subsidies and disaster-related spending would help policymakers better align public finances with green growth and improve accountability as Pakistan navigates economic recovery amid rising climate risks.
Federal revenues comprise tax revenues collected by the Federal Board of Revenue (FBR) and non-tax revenues administered by the Finance Division. The climate relevance of non-tax revenues will now be assessed based on the environmental impact of the underlying activity. Levies on environmentally harmful activities, such as fossil fuel use, plastics and hazardous waste, will be treated as positively correlated with climate objectives.
To standardise reporting with global practices, the Finance Division has introduced four base categories for classifying green-related tax and non-tax revenues: Energy, Transport, Pollution and Natural Resources. These include petroleum levies, greenhouse gas emissions from energy use, motor vehicles and road usage, congestion charges, waste management fees, noise pollution charges, and levies on the extraction and abstraction of natural resources such as water and forests.
The BCC also formally extends climate tagging to subsidies, which make up a sizeable portion of the federal budget. While climate-relevant expenditures under Running of Civil Government (RoCG) and the Public Sector Development Programme (PSDP) have been tagged since FY2023-24, the government has now introduced Form III-C to assess subsidies from FY2025-26 onwards.
Under the methodology, ministries must identify each subsidy by cost centre, sector and budget estimate, and classify it as climate adaptation or mitigation. Adaptation includes agricultural risk management, crop insurance and climate-resilient infrastructure, while mitigation covers clean energy, renewables, energy efficiency, power transmission, mass transit and electric vehicles.
Subsidies will also be tagged by impact — directly favourable, indirectly favourable, neutral, mixed or potentially unfavourable — enabling the government to evaluate whether fiscal support aligns with climate goals or risks worsening environmental pressures.
The Finance Division has also reiterated instructions for disaster budgeting, citing Pakistan’s high vulnerability to climate-induced shocks. Disaster-related spending will continue to be tagged across the federal budget, covering both pre-disaster risk reduction — including prevention, mitigation and preparedness — and post-disaster response, recovery and reconstruction. Each category will carry a specific code at the cost-centre level to improve transparency and tracking.
The ministry said the provisional macroeconomic framework will be prepared during the current month, while the mid-year review report will be presented in the National Assembly in February 2026.
All ministries have been directed to submit key budget forms, revised revenue and expenditure estimates, and development project details by February 20, 2026.
Meetings of the Budget Review Committee will be held from March 30 to April 12, 2026, followed by notification of the exchange rate assumptions on April 15, 2026. Approval of the Budget Strategy Paper will be obtained by April 20, 2026, after which budget ceilings for current and development budgets will be issued between April 21 and April 25, 2026.
Meetings of the Annual Plan Coordination Committee (APCC) will take place in the first week of May 2026, while the National Economic Council (NEC) is scheduled to meet in the second week of May.
The Finance Division said all budget documents will be finalized by the end of May 2026, and quarterly budget estimates must be submitted by June 30, 2026.
With the issuance of the Budget Call Circular, the government has formally kicked off the FY2026-27 budget process, combining macroeconomic planning with climate-focused fiscal reforms as Pakistan prepares its next federal budget.