ECONOMIC SURVEY 2025-26: Provinces’ development freeze to persist beyond next fiscal year

Pakistan's economic outlook remains challenging as the Economic Survey 2025-26 indicates that major targets across key sectors have been missed. Finance Minister Muhammad Aurangzeb acknowledged the nation's resilience amid three significant shocks but confirmed that the freeze on provincial development programs will persist beyond the next fiscal year. This measure is expected to generate over Rs900 billion for the Centre's strategic needs. The upcoming budget aims to stimulate the agriculture and housing sectors through incentives. Additionally, the government plans to introduce a centralized tax system and a new retailer model. While the current account deficit has narrowed to $252 million and remittances are projected to reach $41-42 billion by year-end, the impact of oil price fluctuations is expected to continue into the next year. The fiscal deficit has decreased to 0.7% of GDP, and the debt-to-GDP ratio has fallen to 68.5%. The Federal Board of Revenue has also reported recovering Rs94 billion through digitization and AI audits.

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The freeze on provincial development programmes, expected to generate more than Rs900 billion in additional resources for the Centre’s strategic needs, will continue for a specific period beyond one year.