The Finance Division has formally begun preparations for the federal budget for fiscal year 2026–27 by issuing the Budget Call Circular (BCC), outlining macroeconomic priorities, a detailed budget timeline, and an expanded framework for climate and disaster-related budgeting. The government has projected GDP growth of 5.1 percent and inflation of 6.5 percent for the next fiscal year.
Alongside the BCC, the government released a provisional macroeconomic framework projecting GDP growth of 4.0 percent in FY2025–26, rising to 5.1 percent in FY2026–27. Inflation is expected to ease to 6.1 percent in FY2025–26 and 6.5 percent in FY2026–27, supported by moderating global commodity prices and ongoing structural reforms.
The new instructions, circulated to all ministries and Principal Accounting Officers, require federal entities to identify, classify, and tag revenues and expenditures with climate and environmental relevance while submitting FY2024–25 actuals, FY2025–26 revised estimates, and FY2026–27 budget estimates.
For the first time, the Budget Call Circular introduces detailed guidance on green components of both tax and non-tax revenues, climate-linked subsidies, and disaster budgeting. Officials said the strengthened tagging of revenues, subsidies, and disaster-related spending would help align fiscal policy with climate resilience goals and improve transparency as Pakistan manages economic recovery amid rising climate risks.
Federal revenues consist of tax receipts collected by the Federal Board of Revenue and non-tax revenues administered by the Finance Division. The climate relevance of non-tax revenues will now be assessed based on the environmental impact of the underlying activity. Levies on environmentally harmful activities such as fossil fuels, plastics, and hazardous waste will be treated as positively correlated with climate objectives.
To align reporting with international standards, the Finance Division has introduced four base categories for classifying green-related tax and non-tax revenues: Energy, Transport, Pollution, and Natural Resources. These include petroleum levies, greenhouse gas emissions from energy use, motor vehicles and road usage, congestion charges, waste management fees, noise pollution charges, and levies on the extraction of natural resources such as water and forests.
The BCC also extends climate tagging to subsidies, which represent a significant portion of federal spending. While climate-related expenditures under the Running of Civil Government and the Public Sector Development Programme have been tagged since FY2023–24, a new Form III-C will now be used to assess subsidies starting FY2025–26. Ministries must identify each subsidy by cost centre and sector and classify it as climate adaptation or mitigation. Adaptation includes agricultural risk management, crop insurance, and climate-resilient infrastructure, while mitigation covers clean energy, renewables, energy efficiency, power transmission, mass transit, and electric vehicles.
Subsidies will also be classified by impact, directly favourable, indirectly favourable, neutral, mixed, or potentially unfavourable, allowing policymakers to assess whether fiscal support aligns with environmental objectives or risks worsening climate pressures.
The Finance Division has reiterated instructions on disaster budgeting, citing Pakistan’s high vulnerability to climate-related shocks. Disaster spending will continue to be tagged across the federal budget, covering both pre-disaster risk reduction and post-disaster response, recovery, and reconstruction. Each category will carry a specific cost-centre code to improve tracking and accountability.
According to the announced timeline, the provisional macroeconomic framework will be finalized during the current month, while the mid-year review report will be presented to the National Assembly in February 2026. All ministries have been directed to submit revised revenue and expenditure estimates and development project details by February 20, 2026.
Meetings of the Budget Review Committee are scheduled from March 30 to April 12, 2026, followed by notification of exchange rate assumptions on April 15. Approval of the Budget Strategy Paper will be obtained by April 20, after which budget ceilings for current and development spending will be issued between April 21 and April 25.
The Annual Plan Coordination Committee will meet in the first week of May 2026, while the National Economic Council is expected to convene in the second week of May. All budget documents are to be finalized by the end of May, with quarterly budget estimates due by June 30, 2026.
With the issuance of the Budget Call Circular, the government has officially launched the FY2026–27 budget process, combining macroeconomic planning with climate-focused fiscal reforms as Pakistan prepares its next federal budget.
