Planning Minister Ahsan Iqbal has confirmed that the government will increase the defence budget next fiscal year. At the same time, he assured the public that it plans to provide relief. Importantly, Iqbal clarified that the International Monetary Fund (IMF) did not pressure the budget.
Speaking to a delegation of engineers led by Engineer Ameer Zameer, Secretary General of the Institution of Engineers Pakistan, Iqbal emphasized India’s water aggression. He promised the government would dedicate funds on a priority basis to guarantee the country’s long-term water security. He pushed for the rapid completion of hydro projects like the Diamer-Bhasha Dam to deny India any advantage.
Iqbal attributed the budget delay to the prime minister’s foreign trip and Eid holidays. He reiterated the government’s commitment to relief and announced a paid internship programme for young engineers. He vowed to include their demands in the new budget.
Regarding tensions with India, Iqbal said the nation stayed united after recent military success. Furthermore, he condemned PTI founder Imran Khan, saying, “Imran Khan has not responded favorably to COAS Field Marshal Syed Asim Munir’s acknowledgment for exemplary leadership.” He insisted the government will oppose any moves that threaten national unity.
IMF Talks Progress
Meanwhile, the government continues talks with the IMF on the upcoming budget. The Federal Board of Revenue (FBR) proposed lowering income tax rates for salaried people by 2.5%. However, the IMF rejected raising the non-taxable income limit from Rs0.6 million to Rs1.2 million. Instead, it considers reducing the lowest tax rate from 5% to 1%. It may also lower the highest tax slab from 35% to 32.5%. People earning over Rs1 million monthly will face a 10% surcharge, while the super tax on higher incomes might decrease gradually.
The government is reviewing proposals to raise military salaries. Civilian pay and pensions will increase according to inflation. Depending on expenditures, the FBR may raise its tax collection target from Rs14.05 trillion to Rs14.2 trillion.
Nathan Porter from the IMF stated, “We had productive conversations with the authorities on their FY2026 budget plans and economic policy reforms supported by the 2024 Extended Fund Facility (EFF) and the 2025 Resilience and Sustainability Facility (RSF).” He added Pakistan aims for a primary surplus of 1.6% of GDP. The IMF pushed for better tax collection and cost reductions. They also discussed energy reforms and flexible exchange rates to rebuild reserves.
Sources revealed the IMF requested alternative ways to fill a Rs56 billion gap if taxes decrease. The FBR suggested raising the capital gains tax for companies from 15% to 20–25%. It also proposed increasing withholding tax on imports by 2%, excluding raw materials. However, the IMF warned these measures might conflict with tariff policies and strain the corporate sector.
World Bank Lauds Pakistan’s Reform Drive
World Bank Managing Director Anna Bjerde visited Pakistan and met Prime Minister Shehbaz Sharif along with other officials. She praised Pakistan’s reform momentum, saying, “Comprehensive reforms hold the key to Pakistan’s sustainable economic recovery and poverty alleviation.” Bjerde toured World Bank-funded projects in Sindh and engaged with healthcare workers and flood victims. She also held discussions on development projects with Sindh Chief Minister Murad Ali Shah and MNA Aseefa Bhutto Zardari.
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