Cabinet gives nod to federal budget, 'okays' 7% increase in salaries, pensions

The federal cabinet on Friday approved the Budget Statement and Finance Bill for the 2026-27 fiscal year during a meeting chaired by Prime Minister Shehbaz Sharif, paving the way for the formal presentation of the budget in the National Assembly. According to sources, the federal cabinet has decided to increase the salaries and pensions by seven percent.

The federal cabinet also gave approval to reduce 35 percent tax on salaried class to 29 percent.

According to the 24NewsHD TV channel, the cabinet meeting was held shortly before the commencement of the National Assembly’s budget session, where the government was scheduled to unveil its fiscal plans for the upcoming financial year.

Sources said the Prime Minister summoned the budget speech text of the Finance Minister, and there is a possibility of some changes in it after some demands from cabinet members.

Addressing the federal cabinet, Prime Minister Shehbaz Sharif said his government had made every effort to prepare the best possible budget for the 2026-27 fiscal year while avoiding the imposition of new taxes despite significant economic challenges.

The prime minister said the government was set to present its third budget and had worked diligently to formulate a financial plan that balanced economic stability with public welfare.

Shehbaz Sharif said the government had sought to ensure that no new taxes were introduced in the budget. He noted, however, that tax measures had been unavoidable in the previous two budgets because of Pakistan’s commitments under the International Monetary Fund (IMF) programme.

Highlighting the government’s economic performance, the prime minister said the policy interest rate had been reduced from 22.5 per cent to 11 per cent during the administration’s tenure. He also pointed to a significant decline in inflation, saying the rate had fallen from 38 per cent to single digits within two years.

The prime minister said these developments reflected the government’s efforts to stabilise the economy and create a more favourable environment for growth and investment.

The PM said the federation and the four provinces have jointly prepared excellent budget proposals and thanked President Asif Zardari and Bilawal Bhutto for their cooperation in the budget.

During his remarks, Shehbaz Sharif also paid tribute to those who had recently lost their lives in the line of duty. Referring to a funeral held in Rawalpindi a day earlier, he said the nation had honoured martyrs that included officers and soldiers of the Pakistan Army as well as members of the Christian community.

He praised their sacrifices and reaffirmed the government's commitment to supporting the families of those who had laid down their lives in service to the country.

Ahead of the meeting, a 24NewsHD journalist asked the prime minister whether the new budget would be “people-friendly or IMF-friendly”,  he did not respond to the question and proceeded into the cabinet meeting after briefly acknowledging reporters with a wave.

Meanwhile, in a post on X, PM Shehbaz Sharif said the budget has been prepared with utmost diligence and sincerity, keeping the public's welfare at the forefront of the government's priorities.

Prime Minister Shehbaz Sharif says the welfare and well-being of the people have been accorded the highest priority in the upcoming budget.

Reporter: Awais Kiyani