Budget provides relief after economic stabilization: Tarar

ISLAMABAD:

Information Minister Attaullah Tarar on Wednesday described the coming fiscal year’s budget as “relief-oriented” and said the country had moved from the risk of financial default toward stabilization following structural reforms in taxation, governance and enforcement.

On June 12, Finance Minister Muhammad Aurangzeb presented the federal budget for FY2026-27 in the National Assembly, proposing total federal expenditure of around Rs 18 trillion. and set an economic growth target of 4%. He described the budget as being rooted in “stabilisation, reform and growth”.

Aurangzeb said the economy had grown by 3.7% in FY2025-2026 despite floods and regional tensions and reached a size of $452 billion. The income per per capita rose to $1,901, while large-scale manufacturing posted its strongest performance in four years.

In a detailed briefing on the 2026-27 federal budget, Tarar, who spoke alongside Minister of State for Finance Bilal Azhar Kayani, said the government had introduced the financial plan after a difficult period of economic uncertainty.

He said the coming financial year was tackled with a focus on public relief along with continued macroeconomic stability. He added that the engagement with the International Monetary Fund had been crucial in averting default and restoring economic confidence.

Citing past uncertainty, he said that without progress in the Paris talks, “there was a risk that the country could have defaulted”. He added that the Prime Minister had personally played a key role in securing agreements that led to stabilization.

Tarar said reforms in tax dispute resolution had also improved recovery, with new tribunals established and long-pending cases expedited. He said the removal of stay orders had enabled significant additional revenue collection, adding: “In the past year alone, enforcement measures have generated around Rs 800 billion.”

The minister said that these fiscal gains had enabled the government to introduce a broad package of tax relief.

He said that wage earners earning up to Rs.50,000. per month, would not pay income tax, while those earning between Rs.50,000 and Rs.100,000.

He added that further reductions had been introduced across higher income groups to ease pressure on middle income groups, and said the policy aimed to ensure “the burden does not fall disproportionately on wage earners”.

A significant part of the briefing focused on reforms in the Federal Board of Revenue (FBR), which Tarar said had been central to improving revenue collection and creating fiscal space for tax relief.

“There were several problems in the FBR,” he said. “Digitalisation had stalled, officers were corrupt and postings were made on recommendation.” He said the government had ended influence-based postings and introduced a merit-based system.

He stressed that “appointments are no longer made on recommendation” and warned that any attempt to circumvent procedures would result in disciplinary action. He said civil servants were now assessed through structured evaluations and ranked according to merit.

“There is now a faceless assessment system and no direct contact with customs officers,” he said, adding that clearance times had been reduced from weeks to days through automation and digital processing. Under the system, importers and exporters clear goods digitally using goods declaration numbers without direct contact with customs officials.

Read: Budget 2026-27: FinMin expects 4% growth as government unveils agenda for fiscal policy, tax and reform

On revenue enforcement, the minister said the government’s anti-evasion measures had significantly increased collections across several sectors, including sugar, tobacco, beverages and cement.

He said the sugar industry had been the first major sector to be brought under digital surveillance, with production and sales tracked through cameras and barcode systems.

“Production and sales are monitored through an IT system with barcode and QR code tracking,” he said, adding that the reforms had generated about Rs 60 billion in additional revenue from the sugar sector alone.

He further said that the tobacco industry had shown estimated leakages of around Rs.200 billion, which were being addressed through enforcement operations against illicit trade.

On housing policy, Tarar said the government had reduced taxes on small real estate transactions and prioritized construction as a driver of economic activity.

He said Rs90 billion had been earmarked for the ‘Apna Ghar’ scheme, with Rs11 billion already disbursed, adding that construction activity would generate demand across more than a dozen allied industries, including cement, steel and building materials.

He further said that export competitiveness had also been strengthened through the removal of advance tax and super tax for exporters, along with a reduction in export refinancing rates to four percent compared to market rates of about 11 percent. He said these steps were aimed at increasing investment, production and employment.

The briefing also highlighted youth-focused programs, including agricultural and business loans, expected to benefit around 550,000 young people. Tarar said investments in skills development and sports initiatives, alongside the expansion of educational institutions such as Danish schools, were part of a wider human capital strategy.

In agriculture, he said import duties on machinery including tractors, harvesters, pumps and related equipment had been abolished to reduce costs for farmers. He added that funding support would be extended through lower interest rates under a “Zarakhizi” scheme, while research institutions were reformed on a merit basis.

He also said that around 3.5 million retailers were currently outside the tax net and would be brought into it through a simplified flat tax scheme developed following consultations with trade organisations. Under the scheme, retailers would pay a minimum tax of Rs 25,000. annually and receive formal registration while benefiting from simplified compliance requirements.

Read more: Money is there, just not in the budget

Tarar confirmed that Benazir’s income support program had been expanded to Rs 833 billion, supporting more than 10 million families. He said eligibility criteria were aligned with international standards in collaboration with the World Bank and payments were largely made to women in beneficiary households.

He added that the budget also included tax exemptions on reproductive health products for women, aimed at reducing costs and improving access to essential health care.

On the private sector, he said the government had increased the minimum wage by 10 percent and raised public sector wages, while ensuring that freelancers and IT professionals were not subject to additional taxation. “There is no additional tax burden on freelancers,” he said, describing the IT sector as a priority for growth.

Tarar said that Prime Minister Shehbaz Sharif was always ready to provide relief, adding that all sections of the society had been extended relief in the budget. He said the government was moving towards export-led growth, while new tribunals had been formed to improve tax dispute resolution.

He said Pakistan had previously been in a fragile economic position where, as he put it, “some government officials even went on leave because they did not want a default to happen during their tenure.” He added that at the time “no one was willing to take responsibility for the economy”, describing the period as one of uncertainty and indecision.

According to Tarar, the situation was stabilized under the leadership of Pakistan Muslim League-Nawaz. He said the party’s leadership entered a critical phase and guided the economic management, crediting former Prime Minister Nawaz Sharif’s vision and Prime Minister Shehbaz Sharif’s execution of the economic policy.

Concluding the briefing, Tarar described it as “a reform-oriented and relief-oriented budget achieved through teamwork”, adding that the government remained committed to long-term economic stability, growth and recovery