Pakistan has spent three years swallowing bitter medicine, but this budget is the first to taste different.

GDP growth of 3.7 per cent, achieved despite flood losses and the shockwaves of an Iran-US war that threatened to derail the entire region, won’t make headlines on its own. But context matters, and the context here is extraordinary. Inflation has gone down from 22pc to 11.5pc, heading toward 7-7.5pc by the end of the year. Reserves have moved from $4 billion to $17bn. The fiscal deficit has nearly halved, from 7.8pc to 4pc. Moody’s, Fitch, and S&P have all upgraded us. Pakistan returned to international bond markets after four years, and the Euro Bond was oversubscribed.

Credit where it’s due: navigating one of the most dangerous geopolitical environments in a generation, without derailing the stabilisation programme, is no small achievement. Many economies would have used regional turmoil as an excuse to abandon discipline, but this government didn’t.

However, macro stability doesn’t pay anyone’s grocery bill. The real test of FY27 is whether discipline at the top converts into relief at the bottom, for the salaried class, exporters, retail, and industry.

The real test of FY27 is whether discipline at the top converts into relief at the bottom

Salaried class gets something back

For years, the salaried class has been the most squeezed, most documented, least defended segment of the economy, taxed at source, unable to evade, and ignored in every relief package. This budget breaks that pattern.

The tax-free threshold doubles from Rs600,000 to Rs1.2 million. The maximum salary rate drops from 35pc to 29pc, and the threshold for hitting that top rate has been pushed from Rs4.1m to Rs7m, with new intermediate slabs cushioning the climb. The surcharge on the highest salaried bracket, 10pc just two years ago, is gone entirely.

Thus, someone earning Rs500,000 a month saves roughly Rs13,000 monthly and at Rs 1m, the savings exceed Rs40,000. At Rs3m, nearly Rs100,000 stays in the pocket every month. This is the largest direct fiscal transfer to the documented middle class in recent memory.

There’s a quieter win too, as Section 7E, the “deemed income” tax on property you simply own, has been abolished. Anyone who has ever opened a tax notice for a house they never rented out will recognise what a relief this is.

A caveat is that this is predicated on the assumption that the Federal Board of Revenue’s target of Rs15.26 trillion, built on faceless assessment, AI-driven risk profiling, and full data integration with banks and property records, actually works. The relief is real. Whether it’s sustainable is now Islamabad’s problem to prove, not the Parliament’s.

Exporters get relief, challenges remain

The advance/withholding tax burden on export proceeds has been cut from 2pc to 1.25pc, which is a much-needed relief and definitely a move in the right direction. For exporters operating on razor-thin margins, this is real cash-flow relief, not a slogan.

But relief on tax rates doesn’t fix structural friction. The anomalies within the Export Facilitation Scheme, the delays, the documentation mismatches, and the inconsistent application across ports still need to be addressed. A good rate on a broken scheme is half a win.

And the bigger issue remains infrastructure. Pakistan cannot compete on speed-to-market with a port and rail network that still functions like a feeder system rather than a gateway. The ML-I railway financing and the construction of the Karachi section are welcome, but exporters need cargo moved from the factory to the vessel within days, not weeks. Until Karachi behaves like a hub rather than a feeder port, every tax cut competes with a logistics tax that nobody talks about.

The 0.25pc concessionary rate for IT exports has been extended to 2029, which the sector has repeatedly requested. Federal excise duty on machinery has been abolished, and 7,500 tariff lines rationalised, giving 120 business sectors cheaper inputs.

Super tax has now been abolished for exporters as well, another welcome signal that the burden on the export sector is genuinely being lightened, not just rearranged. Taken together, these signals indicate that Pakistan is shifting gears from stability to growth.

Positive steps for retail and real estate

The fixed tax system for small retailers and the doubling of the withholding exemption threshold for small traders to Rs200m are the kind of incremental formalisation that is desperately needed. It won’t transform retail overnight, but it nudges undocumented players toward the net without punishing them into hiding.

Real estate gets real attention, too. The advance tax on property transactions is cut to flat rates of 2.75pc and 1.5pc, and the capital value tax on foreign assets is abolished. Documentation finally costs less than evasion; that’s the test of any good tax policy.

The year ahead

Super tax is abolished entirely for incomes up to Rs500m, major relief for mid-sized businesses, though banks, fertiliser and exploration and production sectors remain excluded.

The numbers on paper this year are the best in a decade. The next twelve months will decide whether this budget is remembered as the year Pakistan turned the corner, or yet another missed opportunity.

The writer is Vice Chairman, Pakistan Business Council, and Chairman, Pakistan Retail Business Council.

Published in Dawn, The Business and Finance Weekly, June 15th, 2026