Islamabad: The Federal Budget for the fiscal year 2027 was unveiled in the National Assembly, presenting a blueprint aimed at fostering economic growth while adhering to fiscal constraints. The plan includes reducing overall expenditure and implementing stricter tax measures as part of an ongoing agreement with the International Monetary Fund (IMF). Despite the ambitious targets, the government's capacity to implement them effectively remains a significant concern.

According to JS Global, the budget emphasizes revenue generation with a target of Rs20.6 trillion, marking a 14% increase year-on-year. This is driven by a 17.5% rise in tax revenues to Rs15.3 trillion and a 5% increase in non-tax revenues to Rs5.3 trillion. Key tax revenue sources include a YoY increase of Rs1.1 trillion in income tax and Rs0.6 trillion in sales tax. While non-tax revenue targets are deemed achievable, a notable 40% decline in profits from the State Bank of Pakistan is anticipated due to lower effective interest rates. The budget also relies on a 12% increase in the Petroleum Levy, contingent upon stable international oil prices.

Interest payments continue to be the largest expenditure, accounting for Rs8.0 trillion of the Rs18.8 trillion budget. Development spending remains limited, with the Public Sector Development Program (PSDP) allocation remaining unchanged at Rs1 trillion. Despite these limitations, the government is hopeful for a Rs1.8 trillion surplus, a 30% YoY increase, after Rs8.8 trillion is transferred to the provinces.

The Pakistan Stock Exchange (PSX) is expected to respond positively to the budget, as it avoided anticipated negative measures for capital markets. The reduction in the super tax is expected to boost investor confidence and support market sentiment in the upcoming sessions.