Pakistan has unveiled an annual federal budget with ambitious plans to boost economic growth, but analysts remain skeptical about the feasibility of these goals. The budget, announced on Tuesday, aims for higher revenues and a significant reduction in the fiscal deficit under reforms supported by the International Monetary Fund (IMF). Finance Minister Muhammad Aurangzeb highlighted cuts or removal of customs duties on thousands of raw materials and intermediate goods to enhance competitiveness for exports. Despite these measures, growth drivers are unclear as the government targets 4.2% GDP growth for fiscal 2026, up from 2.7% this year. Analysts like Callee Davis from Oxford Economics find this projection overly optimistic given recent economic performance. Structural reforms are underway, focusing on pro-market transitions akin to East Asia’s models. However, revenue shortfalls and low tax compliance, with only 1.3% of the population paying income tax in 2024, raise doubts about achieving these targets. While the budget aligns with IMF expectations, defense spending has increased by 20%, excluding military pensions, following recent conflicts. This hike is facilitated by reduced interest payments due to central bank rate cuts.
— new from Reuters
