Finance Minister Muhammad Aurangzeb on Saturday defended the federal budget for fiscal year 2026-27, saying the government had fully utilized the available fiscal space to support economic activity, encourage investment, and lay the foundation for sustainable, export-led growth.
Speaking at a post-budget press conference, Aurangzeb said the government had introduced a range of measures aimed at boosting exports, improving competitiveness, and strengthening key sectors of the economy. He pointed to the proposed abolition of advance tax for exporters and a phased reduction in the super tax as major steps to improve the business environment.
Under the budget proposals, the government plans to gradually reduce the super tax across six income slabs. For companies earning more than Rs500 million annually, the rate is proposed to be cut from 10 percent to 8 percent. Aurangzeb said the measures were designed to accelerate economic expansion and support the formal sector.
Addressing taxation reforms, the finance minister emphasized the need to both deepen and broaden the tax base. He said digital monitoring initiatives were already generating additional revenues and revealed that a new tax model presented in parliament would rely increasingly on automation and artificial intelligence to reduce human intervention, improve compliance, and enhance transparency.
He said the proposed retailers’ scheme was intended to bring more businesses into the tax net and widen revenue collection without placing undue pressure on existing taxpayers.
Responding to concerns about economic growth, Aurangzeb said the government had received encouraging feedback on its economic direction and remained focused on moving beyond stabilization toward sustained growth.
The finance minister also addressed concerns over regional geopolitical tensions, saying the government had so far managed the situation effectively. However, he cautioned that any disruption to regional energy infrastructure could affect the economy during the next fiscal year, while expressing hope for a swift resolution of ongoing conflicts.
Aurangzeb reiterated the government’s commitment to reducing the trade deficit and increasing services exports, particularly in the information technology sector. He added that proposed income tax relief for salaried individuals had been widely welcomed.
According to the budget proposals, the income tax rate for individuals earning between Rs2.2 million and Rs3.2 million annually would be reduced from 23 percent to 20 percent. Those earning between Rs3.2 million and Rs4.1 million would see the rate lowered from 30 percent to 25 percent, while taxpayers earning between Rs5.6 million and Rs7 million would benefit from a reduction from 35 percent to 32 percent.
Minister of State for Finance Bilal Azhar Kayani described the budget as one that provides relief to the salaried class, industrialists, exporters, the construction sector, and citizens seeking affordable housing. Acknowledging that salaried individuals had borne a significant tax burden in recent years, he said the latest relief measures were designed to ensure a meaningful reduction in that burden across income groups.
Kayani said the removal of advance tax for exporters and the gradual elimination of the super tax were among the primary demands of exporters and formal industry, adding that the government had consulted chambers of commerce and incorporated their feedback into the budget proposals.
He also announced the abolition of taxes on selected social-sector products, including sanitary pads and contraceptives, describing the move as part of broader efforts to improve affordability and public welfare.
On the agriculture front, Aurangzeb said agricultural credit and financing had increased by 15 percent year-on-year, with total agricultural financing surpassing Rs2 trillion. He noted that the collateral-free ZarKhez Scheme for small farmers was progressing positively and helping improve access to finance.
The finance minister added that the Prime Minister’s Youth Business and Agriculture Loan Scheme had reached a total size of Rs262 billion, of which Rs125 billion had been allocated to the agriculture sector.
To improve agricultural productivity, the government has proposed eliminating customs duties and regulatory duties on imported agricultural machinery and equipment that are not manufactured locally. These include combined harvesters, tractors, centrifugal pumps, and other machinery used to enhance farm output and efficiency.
Highlighting the importance of housing and construction to economic growth, Aurangzeb said the sector remained a key component of the government’s pro-business agenda. Information Minister Attaullah Tarar noted that around a dozen industries were linked to the housing sector and said additional allocations had been proposed for the Prime Minister’s Apna Ghar Programme.
Tarar also praised ongoing reforms at the Federal Board of Revenue (FBR), describing them as unprecedented. He said efforts to improve transparency, reduce leakages, and strengthen enforcement, particularly in sectors such as sugar, were beginning to yield results. He further claimed that the FBR’s institutional structure was now free from political influence and external interference.
Unveiled on Friday, the Rs18.77 trillion federal budget targets economic growth of 4 percent and average inflation of 8.2 percent in FY27. The government has set a revenue collection target of Rs15.264 trillion, representing a 17.6 percent increase over the revised estimate of Rs12.983 trillion for the outgoing fiscal year.
The budget allocates Rs8.045 trillion for debt servicing and projects a fiscal deficit of 3.6 percent of GDP, equivalent to Rs5.226 trillion, alongside a primary surplus of 2 percent in line with commitments under the International Monetary Fund (IMF) programme.
Among other measures, the government has proposed a fixed tax scheme for small traders and shopkeepers, higher minimum tax rates for wholesalers and retailers, taxation of social media earnings, incentives for small electric vehicles and motorcycles, and restrictions on luxury electric vehicle imports.
