With several external and internal shocks rocking Pakistan’s economy, the federal government is all set to present the much-awaited annual budget today.
Finance Minister Muhammad Aurangzeb will table the Finance Bill 2026-27 in the National Assembly, followed by the Senate.
This comes a day after Aurangzeb unveiled the Economic Survey 2025-26 showing that Pakistan’s gross domestic product (GDP) reached its highest ever, but the South Asian nation missed its growth target due to external shocks.
With the government set to unveil the budget today, here’s a one-stop guide to all economic terms to help you understand the contours of the Finance Bill.
GDP
The gross domestic product or GDP is the total monetary or market value of all the finished goods and services produced within a country’s borders during a specific time period.
PSDP
The Public Sector Development Program (PSDP) is an important public intervention to encourage private investment by developing human capital and improving infrastructure. The PSDP is in line with the government’s overall long-term development goals.
Revenues
The revenue budget gives the details of the sources from which the government’s revenue comes. Revenue can be further classified into tax revenue and non-tax revenue.
- Tax revenue — all revenue collected from taxes on income and profits, social security contributions, taxes on goods and services, payroll taxes, taxes on the ownership and transfer of property and other taxes
- Non-tax revenue — it is the recurring income earned by the government from sources other than taxes; these include royalties, dividends from public investments in state-owned enterprises, etc.
Petroleum tax
A federal government tax imposed on petroleum products such as gasoline and diesel. Collected per litres, it is included in fuel prices and serves as an important source of non-tax revenue for the government.
Expenses
Public expenditure or expenditure includes all public consumption, investment and transfer payments. It can be further classified into capital expenditure and revenue expenditure.
- Capital expenditure – the amount spent on creating assets, basically long-term expenditure. It is a reason for a reduction of the state’s obligations. It adds to the capital stock in the economy and is of a one-time nature.
- Revenue expenditure – these are short-term expenses that are spent in the current period or typically within a year.
Fiscal policy deficit
It is a shortfall of a government’s income compared to its expenditure. A government running a fiscal deficit spends beyond its means.
Financing
Financing is the process of raising funds for business activities, making purchases or investing.
Budget deficit
A budget deficit occurs when expenditures exceed revenues, and it can indicate a country’s economic health.
Debt to GDP ratio
The debt-to-GDP ratio is the metric that compares a country’s public debt to its GDP.
Subsidy
A grant is a benefit given to the population by the government. It can be direct (such as cash payments) or indirect (such as tax relief).
Debt servicing
Debt service is the cash required to cover the repayment of interest and principal on a debt for a specified period of time
Tax to GDP
A tax-to-GDP ratio is a number to measure a nation’s tax revenue relative to the size of its economy as measured by GDP.
