Federal budget preparations for 2025-26 begin with new timeline

ISLAMABAD: Finance Minister Senator Muhammad Aurangzeb has requested all ministries to submit their budget proposals for the Federal Budget 2025-26 by February 9, 2025, to ensure the consultation process stays on schedule.

In a letter to federal ministers, he noted that the budget process for the fiscal year has been initiated earlier than in previous years, with the Finance Division having already issued a Budget Call Circular to all Federal Secretaries and Principal Accounting Officers on January 9, 2025, reported the Business Recorder.

Additionally, the Federal Board of Revenue (FBR) has also sent out letters on January 8, 2025, to key stakeholders in both the public and private sectors, inviting them to share proposals related to tax revenue. These communications have also been made available on the Finance Division and FBR websites.

The Finance Minister said that the federal budget not only manages annual finances but also outlines a three-year macroeconomic and fiscal framework for the country. He said a robust consultative process within a clearly defined timeframe is crucial for aligning national economics with the vision termed ‘Uraan, Pakistan’. He urged timely contributions from ministries by sharing their proposals with the Finance Division and FBR by the designated date.

Each demand will have a single Principal Accounting Officer, and the Finance Division will provide a performance-based budget to these officers, who are responsible for allocating funds to different cost centres according to the Finance Division’s guidelines.

The Accountant General of Pakistan (AGP) has been instructed to withhold payment authorisations where there is no budget provision under the relevant account, including employee-related expenses, consistent with instructions issued on December 4, 2020.

Furthermore, the Finance Division has also highlighted the importance of Foreign Exchange (FE) budgeting for accurately estimating outflows and streamlining release processes. All federal and provincial government bodies are required to submit their FE budget estimates for FY 2025-26 in the specified formats.

Also read: Pakistan’s 2025-26 budget circular introduces green revenue classification

In its budget circular regarding various taxes, including Income Tax, Sales Tax, and Federal Excise Duty, the FBR has solicited proposals aimed at: (i) broadening the tax base for increased revenue participation; (ii) integrating the complete value chain of businesses into the GST framework; (iii) fostering progressive taxation with measures that impose a heavier tax burden on wealthier individuals; (iv) phasing out tax concessions and exemptions across all tax laws; (v) enhancing taxpayer facilitation and simplifying tax legislation to ease the business environment; (vi) diminishing opportunities for tax arbitrage and promoting efficiency through neutrality in taxation; and (vii) eliminating tax distortions and procedural inconsistencies.

Additionally, the National Assembly Secretariat has instructed ministries and divisions to propose their Public Sector Development Plan (PSDP) for FY 2025-26, which needs approval from the relevant Standing Committees.

In a communication, the Joint Secretary Committees referred to Rules 201(6) and (7) of the National Assembly’s Procedure and Conduct of Business, which mandates that each Standing Committee review and, if necessary, suggest amendments to the ministry’s PSDP before it is forwarded to the Ministry of Finance.

Each ministry must submit its PSDP budget proposals by January 31 of the preceding fiscal year, with the Standing Committee required to make its recommendations by March 1.

If recommendations are not made by that date, the proposals are automatically considered endorsed by the committee.