ISLAMABAD — Pakistan is expected to unveil a Rs17.6 trillion (US$62.45 billion) federal budget today, marking a 6.7% reduction from last year, while increasing defence spending by around 20% in response to recent tensions with India.

The fiscal deficit is projected at 4.8% of GDP, down from this year’s 5.9% target. Defence spending is likely to rise from Rs2.1 trillion, excluding military pensions, which already add another Rs563 billion.

To meet IMF conditions under a US$7 billion bailout, the government plans to expand its tax base, enforce agricultural income taxes, and reduce industry subsidies. Currently, only 1.3% of the population pays income tax.

Despite interest rate cuts to boost investment, analysts warn that structural reforms are still lacking. Economic growth is forecast at 4.2% for 2025–26, up from 2.7% this year, but still well below the South Asian average.