Pakistan News
Budget 2025-26: Austerity budget offers ‘crumbs’ for relief
• Next year’s revenue target set at Rs14.13tr
• Provinces’ contribution helps Centre outperform fiscal target, record lowest budget deficit in a decade
• Subsidy allocations have been reduced by 14pc
• Reduced debt servicing drives expenditure containment of nearly Rs2.26tr
• Generous tax relief, incentives for construction sector
• Fuel levy, electricity surcharges to rise next year
• Tough crackdown planned on non-filers, tax evaders
• Development spending squeezed to cut deficit
ISLAMABAD: Maintaining an aggressive stance on fiscal consolidation, as required by the International Monetary Fund (IMF), Finance Minister Muhammad Aurangzeb on Tuesday still managed to offer some notional relief to the salaried class in the federal budget for fiscal year 2025-26, along with incentives for the real estate and construction sectors, in an effort to revive the struggling industrial sector and stimulate economic growth.
At the same time, however, the government announced it was imposing a ‘carbon levy’ of Rs2.5 per litre on petrol, diesel and furnace oil in the upcoming fiscal year, to be doubled the following year. It also introduced a 5 per cent tax on large pensions, an 18pc tax on imported solar panels, and an increase in the debt servicing surcharge on electricity to finance not only interest payments, but also principal debt. Additionally, it announced the gradual elimination of tax exemptions for the tribal areas beginning this year.
Ambitious targets
Despite a record tax shortfall of Rs1.07 trillion recorded for the current fiscal year, the finance minister set next year’s revenue target at Rs14.13tr — an 18.7pc increase from this year’s revised estimate of Rs11.9tr, against the original budget target of Rs12.97tr. This would include approximately Rs840 billion in additional revenue measures, on top of a Rs1.39tr automatic tax increase supported by projected inflation of 7.5pc and economic growth of 4.2pc and expenditure containment of nearly Rs2.26tr (equivalent to 2pc of GDP), driven primarily by reduced debt servicing costs, and also at the expense of development and public welfare initiatives.
Not only the Federal Board of Revenue (FBR), but the provincial governments, too, were unable to meet their commitment of maintaining a Rs1.22tr surplus for the current year. Still, they provided vital support to the federal government with a surplus of Rs1.01tr.
This contribution enabled the federal government to outperform its fiscal target and record a budget deficit of just 5.6pc of GDP (Rs6.44tr) — the lowest in a decade since FY2015-16 — compared to a higher projected deficit of 5.9pc (Rs7.28tr). This notable fiscal tightening was achieved through punishing additional taxation measures amounting to Rs2.2tr (1.8pc of GDP) alongside a reduction in expenditure as interest rates declined from a historic peak of 22pc.
Accordingly, the FY2025–26 budget sets an ambitious target to reduce the budget deficit to 3.9pc of GDP (Rs5.04tr), contingent upon a cash surplus of Rs1.46tr from the provinces. As a result, the primary budget surplus is projected to rise to 2.4pc of GDP, or Rs3.17tr, for the next year — up from this year’s 2.2pc of GDP (Rs2.5tr).
Relief for select groups
The government found sufficient fiscal space to offer some relief to the salaried class, who have been burdened by high tax rates, declining real incomes, and severe inflation over the past two years.
The finance minister proposed a reduction in income tax by half, to 2.5pc, on annual income between Rs600,000 and Rs1.2 million. It is pertinent to mention that there was a discrepancy in the income tax rate for the lowest taxable bracket announced by the finance minister and the tax rate mentioned in the finance bill, which was even lower at 1pc.
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Clarity is awaited on this matter. Similarly, the annual tax on a salary of Rs1.2m was proposed to be reduced to Rs6,000, down from the current Rs30,000. Mr Aurangzeb added that the income tax rate for those earning up to Rs2.2m per annum would be cut to 11pc, down from the current 15pc. Similarly, the tax rate has been reduced to 23pc from 25pc for salaried income between Rs2.2m and Rs3.2m. In addition, the finance minister acknowledged that oppressive tax rates were driving highly skilled professionals to migrate, contributing to a “brain drain”. As a corrective measure, he announced a 1pc reduction in the surcharge on annual incomes exceeding Rs10m.
Apart from this, a 10pc increase in salaries and 7pc rise in pensions was announced for government employees. The salaries of armed forces personnel would also be increased by 25pc, including a special relief allowance in recognition of their recent heroic performance in response to Indian aggression, the finance minister said.
At the same time, the government introduced a generous tax relief and incentives for the construction sector, including access to cheaper mortgage financing, in a bid to revive large-scale manufacturing, which has been contracting for the past three years due to unprecedented increases in energy and borrowing costs. To this end, the finance minister announced a reduction in the withholding tax on the purchase of real estate from 4pc to 2.5pc. The next two current withholding tax rates of 3.5pc and 3pc will also be reduced to 2pc and 1.5pc respectively.
Additionally, a 7pc federal excise duty imposed last year on the transfer of commercial properties, plots and houses has also been proposed to be abolished.
As a new initiative, the budget includes a tax credit on mortgages for homes of up to 10 marla (250 square yards) and flats of up to 2,000 square feet. This is in addition to a new scheme aimed at promoting mortgage financing. The finance minister also announced a reduction in stamp duty on property purchases in Islamabad Capital Territory, from 4pc to 1pc, and expressed hope that provincial governments would follow suit by reducing heavy taxation on immovable property.
The government also succeeded in persuading the IMF to exempt fertilisers and insecticides from taxation for the current year, in an effort to position agriculture as the engine of economic growth.
Tightening the net
On the other hand, the finance minister announced an increase in the tax rate on interest income from 15pc to 20pc, a move that may discourage savings. However, he clarified that this would not apply to small savers or investments in national saving schemes.
Similarly, digital marketplaces and online businesses are to be brought into the tax net through courier companies, it was announced. The minister also announced a 5pc income tax on pensions exceeding Rs10m per annum for pensioners under the age of 70. In a move to promote a cashless economy, non-filers will now be subject to a 1pc advance tax on cash withdrawals, up from the existing 0.6pc. Taxpaying businesses will be discouraged from making cash sales exceeding Rs200,000. Additional measures have also been introduced to encourage online transactions and digital payments.
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Strict steps will be taken against non-filers. Only taxpayers who submit their wealth statements will be allowed to undertake large financial transactions, such as the purchase of vehicles, immovable properties, securities, mutual funds, or the opening of certain bank accounts.
Tightening the noose around unregistered traders, the finance minister proposed the freezing of bank accounts, restrictions on property transfers, and the sealing of business premises in cases of serious violations of sales tax laws, with the involvement of trade bodies. In the same vein, he also announced a notional 0.5pc reduction in the super tax for corporate firms with annual incomes between Rs200m and Rs500m.
Improved tax collection
The finance minister noted a rise in the tax-to-GDP ratio, which has historically been one of the weakest aspects of Pakistan’s economy, from 8.8pc in June 2024 to 10.3pc in the first nine months of the current year. This figure is projected to reach 10.4pc by June 30, 2025. Including non-tax revenue, the federal tax-to-GDP ratio has improved to 11.6pc, representing an increase of 1.2 percentage points, up from 0.8 percentage points last year. The consolidated tax-to-GDP ratio, the finance minister added, has reached 12.3pc, including a 0.7pc contribution from the provinces. “The 1.6pc of GDP increase in FBR revenue is not only the highest in Pakistan’s history, but is also rarely seen anywhere else in the world in recent times,” the minister boasted.
Balancing the budget
The government has set the non-tax revenue target for the next year at Rs5.15tr, slightly higher than the current year’s Rs4.9tr. This brings the total gross federal revenue (FBR plus non-tax) to Rs19.28tr, up from the current year’s original budget target of Rs17.8tr, which was later revised down to Rs16.8tr. After transferring Rs8.2tr to the provinces, the net federal revenue is estimated to be Rs11.07tr for the next year, compared to Rs9.8tr this year. This leaves a projected federal deficit of Rs6.5tr, a reduction from the current year’s budgeted Rs8.5tr, which was later revised to Rs7.44tr.
Subsidy allocations have been reduced by 14pc to Rs1.19tr for the next year, down from Rs1.38tr in the current year. This is primarily due to a 13pc (Rs154bn) cut in power sector subsidies. The tariff differential subsidy for ex-Wapda distribution companies has been reduced by 9.7pc (Rs27bn) to Rs249bn, from Rs276bn this year. Meanwhile, the tariff subsidy for K-Electric has been cut by 28pc (Rs49bn), to Rs125bn from Rs174bn. An even larger reduction has been applied to the tariff subsidy for Azad Jammu and Kashmir, which has been reduced to Rs74bn from Rs108bn, reflecting a cut of 31.5pc.
The major non-tax revenue item is expected to be the petroleum levy on POL products, projected at Rs1.47tr, which is a 26pc increase from the current year’s Rs1.16tr. An even larger contribution is anticipated from State Bank of Pakistan profits, estimated at Rs2.4tr for the next year, though this marks a slight decline from Rs2.6tr this year.
The debt servicing cost for next year has been estimated at Rs8.2tr, representing an 8pc decline from actual repayments of Rs8.95tr, and 16pc lower than the original budget estimate of Rs9.78tr. Pension expenditure is expected to rise by around 4pc, reaching Rs1.06tr, up from Rs1.01tr this year. Military pensions are projected to grow by 12pc to Rs742bn, compared to a 10pc increase in civil pensions, which are expected to reach Rs243bn.
As a result, total current expenditure has been set at Rs16.29tr for the next year, slightly below this year’s figure of Rs16.39tr.
Published in Dawn, June 11th, 2025
Pakistan News
Strategic Siege: Is Pakistan Being Surrounded
Paris (Imran Y. CHOUDHRY) :- Former Press Secretary to the President, Former Press Minister to the Embassy of Pakistan to France, Former MD, SRBC Mr. Qamar Bashir analysis : Geopolitics has never been governed by sentiment. Not religion, not shared history, not cultural brotherhood—only interests. The unfolding realignments across South Asia and the Middle East illustrate this truth with striking clarity. Alliances are shifting, rivalries are recalibrating, and Pakistan finds itself increasingly positioned at the intersection of competing strategic designs.
The roots of today’s complexity stretch back to 1979, when the Soviet Union invaded Afghanistan. Pakistan became the frontline state in a U.S.-backed campaign to counter Moscow. Billions of dollars in American and Saudi assistance flowed through intelligence networks to arm and train Afghan fighters. The mobilization of religious ideology was not incidental—it was strategic. Fighters from across the Muslim world converged in Afghanistan. By 1989, the Soviet withdrawal marked a Cold War victory for Washington and its partners.
But militant infrastructures rarely dissolve once their immediate utility ends. The Taliban emerged in the 1990s from the ashes of war, establishing control over Kabul in 1996. Pakistan was among the few nations to recognize their regime. Following the attacks of September 11, 2001, however, the same Taliban became the primary target of American military intervention. The subsequent 20-year war cost over $2 trillion and claimed more than 170,000 lives before the U.S. withdrawal in August 2021.
The Taliban’s return to power reshaped the region yet again. Instead of ushering in stability for Pakistan, however, cross-border militancy intensified. The Tehrik-i-Taliban Pakistan (TTP), operating from Afghan soil, escalated attacks in Khyber Pakhtunkhwa and Balochistan. Islamabad responded with cross-border airstrikes against militant sanctuaries. While tactically decisive, these actions strained relations with Kabul and risked civilian backlash.
Instead, Pakistan with its deep intelligence roots in Afghanistan, had the option to adopt the same tactics which Afghanistan is using by infiltrating Pakistani Taliban in Pakistan and killing innocent people mostly by detonating human bombs in Mosque. This could have been a more discrete way to weed out the menace of TTP. History suggests that purely kinetic responses can produce unintended strategic consequences. Airstrikes may eliminate immediate threats, but they can also deepen mistrust and create diplomatic openings for rival powers.
In geopolitics, tactical victories can sometimes yield strategic setbacks. By intensifying overt military pressure, Islamabad may have inadvertently accelerated Kabul’s search for diversified partnerships.
That diversification is perhaps the most striking development. The Taliban government, ideologically committed to Islamic governance, has increasingly explored diplomatic and economic engagement beyond traditional Islamic partners. India reopened diplomatic channels in Kabul and expanded humanitarian assistance. Israel has pledged billions of dollars of aid to Kabul in alignment with India. This is a profound geopolitical entanglement: an Islamic Emirate seeking expanded engagement with a Hindu-majority India and a Jewish-majority Israel, even as tensions simmer with neighboring Muslim Pakistan.
This underscores a fundamental principle of realpolitik: states pursue survival and leverage, not theological alignment. Religious brotherhood and shared culture matter, but only when they coincide with national interest calculations. Facing economic collapse, frozen reserves, and diplomatic isolation, Kabul seeks diversification. India offers infrastructure and access. Israel offers technological cooperation and strategic outreach. Ideology yields to necessity.
For Pakistan, however, the optics intensify concerns of encirclement. On its eastern border, India remains a strategic competitor, particularly over Kashmir. On its western frontier now stands an Afghanistan willing to engage Islamabad’s rivals. To the southwest lies Iran, itself navigating tense relations with the United States. This evolving geometry fuels perceptions of a tightening strategic ring.
An additional dimension complicates matters further: Bagram Airbase. During the U.S. presence in Afghanistan, Bagram served as the largest American military installation in the country, with dual runways capable of handling heavy aircraft and advanced surveillance platforms. Its geographic location—approximately 500 kilometers from China’s Xinjiang region—made it strategically significant.
U.S. President Donald Trump publicly criticized the abandonment of Bagram in 2021, arguing that retaining the base would have preserved American leverage, particularly in the context of intensifying U.S.-China rivalry. Bagram’s proximity to Central Asia, Iran, and western China positions it as more than a counterterrorism platform—it is a potential springboard in great-power competition.
While direct American military reentry into Afghanistan appears unlikely in the near term, evolving regional alignments could create indirect pathways of influence. The strengthening of India’s presence in Kabul, combined with Israel’s strategic engagement in broader Asian geopolitics, introduces analytical possibilities. Washington maintains deep defense partnerships with both New Delhi and Tel Aviv. If Afghanistan continues diversifying toward these actors, space may gradually reopen for U.S. strategic leverage—without formal troop deployments.
Interestingly, geopolitics often unfolds through indirect channels. For Washington, containing China remains a central strategic priority. For India, Afghanistan offers westward strategic depth. For Israel, expanded regional engagement broadens diplomatic influence. For Kabul, diversified partnerships reduce isolation. For Pakistan, however, these convergences heighten strategic anxiety.
For Israel, extending its engagement with Kabul through India would provide a strategic foothold in South Asia and enhance its capacity to deter Pakistan from aligning with Turkey and Saudi Arabia in any configuration perceived as intimidating to Israel. Such cooperation could be viewed as a counterweight to a potential alignment involving Turkey, Saudi Arabia, and nuclear-armed Pakistan, which some analysts argue might aim to exert strategic pressure or encirclement against Israel.
Simultaneously, the Persian Gulf remains heavily militarized. The U.S. Fifth Fleet in Bahrain deploys advanced naval assets, while Iran has invested in ballistic missiles, drones, and anti-ship systems designed to offset conventional asymmetry. China, importing substantial Gulf energy supplies, and Russia, expanding ties with Tehran, both observe carefully.
Any escalation between Washington and Tehran would reverberate in Pakistan. The country already hosts approximately 1.3 million registered Afghan refugees. A major Iran conflict could trigger further displacement, compounding economic strain amid IMF-backed reforms and domestic political polarization.
Internally, Pakistan faces political turbulence, including debates surrounding the incarceration of former Prime Minister Imran Khan and federal-provincial tensions. External pressure combined with internal division magnifies vulnerability.
Yet one broader truth emerges from this complex web: strategic encirclement is not solely a product of adversarial design. It can also arise from miscalculation, overreliance on hard power, and insufficient diplomatic agility. States that rely exclusively on military tools risk narrowing their strategic options.
This is a defining moment. Great-power rivalry, regional insecurity, and ideological contradictions intersect at fragile fault lines. Afghanistan’s outreach beyond traditional religious alignments demonstrates the primacy of interest over identity. Bagram symbolizes the enduring shadow of great-power competition. India and Israel’s evolving engagement in Kabul reflects the fluidity of modern alliances.
But history offers a sobering lesson. From the Soviet-Afghan war to the U.S. intervention, military campaigns have reshaped borders without resolving deeper grievances. Stability requires not merely deterrence but diplomacy.
Encirclement strategies may promise leverage. Hybrid doctrines may promise precision. Yet sustainable security demands cooperation grounded in mutual recognition of vulnerabilities.
Geopolitics may be ruthless in its calculations, but peace remains the only enduring strategic victory.
Pakistan News
Pakistan and Russia deepen media and diplomatic dialogue ahead of PM Sharif’s visit to Moscow
Monitoring Desk: The Moscow–Islamabad Media Forum will be held on February 27, 2026, to coincide with the official visit of the Prime Minister of the Islamic Republic of Pakistan, Muhammad Shehbaz Sharif, to Moscow, scheduled for the first week of March 2026.
The forum will serve as a platform for journalists, political experts, and diplomats from Pakistan and Russia to discuss the current state of bilateral relations, explore future opportunities, and analyze how the Russia–Pakistan partnership impacts global politics, the economy, and the contemporary media landscape.
Cooperation between Russia and Pakistan is of particular importance in the context of the transformation of international relations and the formation of a new system of global interaction. In recent years, contacts between the two countries have intensified at inter-parliamentary, expert, and media levels, while practical cooperation in the humanitarian and socio-political spheres continues to expand.
Within the framework of the forum, Russian and Pakistani journalists, political scientists, and representatives of diplomatic circles will discuss the current state and future prospects of bilateral relations, as well as the role of the Russia–Pakistan partnership in political, economic, and information processes shaping the modern world.
The event is timed to coincide with the official visit of the Prime Minister of the Islamic Republic of Pakistan, Shehbaz Sharif, to Moscow from March 3 to 5, 2026.
Admission for media representatives will be granted only through prior accreditation upon presentation of a passport and a valid editorial certificate confirming the journalist’s affiliation with the accredited media organization.
MSPC “Russia Today” reserves the right to refuse accreditation without providing an explanation.
This News is taken from
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Pakistan News
Pakistan launches strikes on Afghanistan, with Taliban saying dozens killed
Pakistan has carried out multiple overnight air strikes on Afghanistan, which the Taliban has said killed and wounded dozens of people, including women and children.
Islamabad said the attacks targeted seven alleged militant camps and hideouts near the Pakistan-Afghanistan border and that they had been launched after recent suicide bombings in Pakistan.
Afghanistan condemned the attacks, saying they targeted multiple civilian homes and a religious school.
The fresh strikes come after the two countries agreed to a fragile ceasefire in October following deadly cross-border clashes, though subsequent fighting has taken place.
The Taliban’s defence ministry said the strikes targeted civilian areas of Nangarhar and Paktika provinces.
Officials in Nangarhar told the BBC that the home of a man called Shahabuddin had been hit by one of the strikes, killing about 20 family members, including women and children.
Pakistan’s Ministry of Information and Broadcasting said it had carried out “intelligence based selective targeting of seven terrorist camps and hideouts”.
In a statement on X, it said the targets included members of the banned Tehreek-i-Taliban Pakistan, which the government refers to as “Fitna al Khawarij,” along with their affiliates and the Islamic State-Khorasan Province.
The ministry described the strikes as “a retributive response” to recent suicide bombings in Pakistan by terror groups it said were sheltered by Kabul.
The recent attacks in Pakistan included one on a Shia mosque in the capital Islamabad earlier this month, as well as others that took place since the holy month of Ramadan began this week in the north-western Khyber Pakhtunkhwa province.
Pakistan accused the Afghan Taliban of failing to take action against the militants, adding that it had “conclusive evidence” that the attacks were carried out by militants on the instructions of their leadership in Afghanistan.
The Taliban’s defence ministry later posted on X condemning the attacks as a “blatant violation of Afghanistan’s territorial integrity”, adding that they were a “clear breach of international law”.
It warned that “an appropriate and measured response will be taken at a suitable time”, adding that “attacks on civilian targets and religious institutions indicate the failure of Pakistan’s army in intelligence and security.”
The strikes come days after Saudi Arabia mediated the release of three Pakistani soldiers earlier this week, who were captured in Kabul during border clashes last October.
Those clashes ended with a tentative ceasefire that same month after the worst fighting since the Taliban returned to power in 2021.
Pakistan and Afghanistan share a 1,600-mile (2,574 km) mountainous border.
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