By Usman Shaukat — President, Rawalpindi Chamber of Commerce & Industry
When Finance Minister Muhammad Aurangzeb rose in the National Assembly on June 12 to present an Rs18.77 trillion budget for fiscal year 2026-27, the business community across Pakistan was watching less for rhetoric and more for the fine print. Days on, having sat through post-budget consultations with our members at the Rawalpindi Chamber of Commerce & Industry, our verdict mirrors that of sister chambers in Lahore and Karachi: this is a balanced budget, carrying real relief for several sectors, but one that leaves the structural questions of industrial revival and durable revenue collection largely unanswered. The headline numbers tell their own story.
The government has targeted 4 percent GDP growth and 8.2 percent inflation for the year ahead, against a fiscal deficit capped at 3.6 percent of GDP and a primary surplus of 2 percent to satisfy IMF benchmarks. The Federal Board of Revenue has been handed a collection target of Rs15.264 trillion, an increase of roughly 17 to 18 percent over this year’s revised estimate. That ambition is precisely where our optimism meets caution: parliamentary finance committees themselves have flagged the target as steep, noting that FBR fell well short of its own goal this year. For a business community that ultimately bears the brunt of mid-year enforcement drives when collection slips, that history matters more than the projection.
It is worth placing this budget against the recovery narrative the finance ministry has been building all year. The economy has grown to roughly $452 billion, per capita income has edged up, large-scale manufacturing expanded by over 6 percent, and foreign exchange reserves have climbed from around $4 billion three years ago to more than $17 billion today, helped along by credit rating upgrades from the major agencies. None of that is in dispute, and the chamber has acknowledged it openly.
The question for our members has never been whether macroeconomic indicators are improving — they clearly are — but whether that improvement is translating into the kind of private investment, factory utilisation and formal job creation that actually shows up on the ground in Rawalpindi’s industrial estates. On the relief side, there is genuine cause for satisfaction. The salaried class — long the most heavily taxed segment of formal Pakistan — gets meaningful breathing room, with the threshold for the top tax slab raised substantially and the surcharge that had squeezed higher earners removed entirely. The super tax has been restructured downward across the board and abolished outright for exporters, a step our chamber specifically welcomed as overdue recognition that export earners cannot be taxed into uncompetitiveness while simultaneously being asked to chase ambitious dollar targets.
Extending preferential tax treatment for IT and IT-enabled services through 2029, alongside a reduction in the tax withheld on export proceeds, sends the right signal to a sector that has quietly become one of the country’s more dependable sources of foreign exchange. Healthcare and pharmaceutical manufacturing also saw welcome movement. Customs duty has been abolished on more than a hundred raw materials used to produce cancer treatments and other essential medicines, a measure that should lower input costs for local manufacturers and, over time, the price patients pay at the pharmacy counter. Taxes on contraceptives and women’s hygiene products have likewise been removed.
Having spent years on both sides of this conversation — as a chamber representative and through the pharmaceutical manufacturing sector — I see this as one of the budget’s clearer wins: it improves affordability for the public while strengthening the cost base of an industry that already exports well beyond our borders. Smaller traders were not forgotten either. A new fixed-tax scheme allows shopkeepers with modest turnover to pay a flat one percent on sales in exchange for freedom from physical inspections, point-of-sale requirements and audits — an attempt, finally, to bring informal retail into the tax net through incentive rather than coercion alone.
Property transactions also benefited, with withholding tax rates on both buyers and sellers reduced and the long disliked tax on deemed rental income scrapped. Real estate brokers and developers in Rawalpindi have told us this should help unlock transactions that had been effectively frozen for two years. Yet the chamber’s enthusiasm has limits, and it would be dishonest to pretend otherwise. The Rs88 billion allocated to the Export Finance Scheme, while a positive gesture, is modest set against an export target of $32.9 billion for the year; if the government is serious about that number, the scheme needs to grow considerably, not incrementally. More fundamentally, debt servicing alone now consumes over Rs8 trillion of the federal outlay, and combined with defence spending of Rs3 trillion, these two heads absorb well over 60 percent of everything the federal government plans to spend in FY27.
What remains for development, for the small and medium enterprises that generate the bulk of private-sector employment, and for the long-promised industrial policy our members have asked for year after year, is comparatively thin. The federal development programme has stayed flat in nominal terms at Rs1 trillion, which in real terms is a contraction. Clarity on sales tax measures, particularly around the long-debated expansion of the Sales Tax Third Schedule, also remains incomplete — a recurring frustration for businesses trying to plan compliance and pricing a year in advance rather than amending systems mid-cycle once statutory orders are issued.
And for all the talk of stabilisation, the budget offers no explicit roadmap for bringing inflation down beyond hoping that fiscal discipline alone will do the work. There is a monetary policy dimension to all this that deserves more attention than it usually receives in budget commentary. Debt servicing costs have actually fallen this year compared to last, not because the underlying debt has shrunk, but because the State Bank of Pakistan has brought its policy rate down from 22 percent two years ago to 11.5 percent today. That trajectory deserves credit, and it explains why this budget had room to offer relief at all. But our chamber continues to make the case, publicly and in policy forums, that a path toward single-digit financing costs is not a luxury — it is the difference between an SME that can afford to expand and one that simply survives.
Every additional point shaved off the policy rate does more for private investment, formal job creation and documented growth than another enforcement drive or amnesty scheme ever will. None of this is to say the budget fails the test. Measured against the constraints of an IMF programme, a still-fragile external account, and a security environment that has pushed defence spending higher, this is a credible, broadly business-friendly document — and the chamber has said so plainly in our public statements since June 12. But a budget is a plan, not an outcome.
Whether FY2026-27 actually delivers 4 percent growth, contained inflation and a genuine uptick in formal investment will depend on how faithfully the Finance Bill’s provisions are implemented, how quickly ambiguities around sales tax and SME taxation are resolved, and whether new institutions such as the Tax Policy Office can translate good intentions into predictable rules that businesses can actually plan around. At RCCI, we intend to keep doing what chambers exist to do: engaging constructively where the government has listened, and pressing — through forums, written proposals and, when necessary, public pressure — on the gaps that remain. The relief measures in this budget are real. So is the work still ahead.
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