A treatise on political priorities and constraints

FOR the first time in years, Pakistan’s budget reads less like a crisis management document and more like a cautious growth agenda. The budget for FY27 comes at a moment when IMF-mandated stabilisation has helped significantly improve the fiscal position, slash inflation, and contain the current account deficit. For a government that spent its first two years ‘firefighting’, this is the first budget that makes political choices. How it has used that opportunity represents both the government’s priorities, and its constraints. “This budget signals a transition from stabilisation towards moderate growth. The salary tax reduction, the removal of super tax for small and medium enterprises, the reduction in super tax from 10pc to 8pc for larger companies, the relief for exporters: these are moving in a positive direction and will be well-received by both the corporate and salaries people,” says AAH Soomro, an independent market and financial analyst. The relief measures are substantive. For salaried workers, income tax rates have been cut by 3-6 percentage points across multiple personal income tax slabs, with the additional surcharge also reduced. For a salaried class that has borne a disproportionate share of Pakistan’s tax burden while wealthier segments evade with impunity, this was an overdue correction. For a government that spent its first two years ‘firefighting’, this is the first budget that makes political choices Corporate relief is equally important. The super tax’s lower slabs have been abolished entirely, freeing companies with profits below Rs500mn from it altogether, while the rate for larger corporates falls from 10pc to 8pc. Exporters benefit from reduced advance minimum income tax, the IT sector’s exemption is extended to 2029, and customs duties on industrial inputs are cut across 92 tariff lines. These measures target stimulating investment and compliance. Sajid Amin, a leading Islamabad-based economist, acknowledges that the budget is better than e