Pakistan unveils annual budget as economy reaches record $452B

Pakistan on Friday unveiled an 18.77 trillion-rupee (about $67.5 billion) budget for fiscal year 2026-27, proposing higher defense spending and lower development expenditure as the country's economy reached a record size of $452 billion.

Amid loud protests from opposition lawmakers, Finance Minister Muhammad Aurangzeb presented the budget in the National Assembly, saying Pakistan's economy had achieved several milestones despite regional and global challenges.

Aurangzeb said the economy grew by 3.7% in the outgoing fiscal year, the highest rate in four years, although it fell short of the government's 4% target.

He said large-scale manufacturing expanded by 6.1%, while the services sector grew by 4.1%, marking the strongest performance for both sectors in four years.

"The size of Pakistan's economy has increased to $452 billion, a new milestone," the minister told parliament.

He added that per capita income had risen to $1,901 from $1,751 a year earlier.

Foreign exchange reserves have increased from about $4 billion three years ago to more than $17 billion, while workers' remittances reached $38 billion during the first 11 months of the current fiscal year, he said.

The government proposed a 7% increase in salaries for federal public-sector employees.

It also proposed a relatively modest increase in defense spending, allocating around 3 trillion rupees ($10.8 billion) for the sector.

For the fiscal year beginning in July 2026 and ending in June 2027, the government has set a GDP growth target of 4% and an inflation target of 8.2%.

Prime Minister Shehbaz Sharif said national security remained essential for economic progress.

Speaking before the budget presentation, he stressed the need for stronger security, investment in water reservoirs and dams, and accelerated development of renewable energy sources, including solar and wind power.

Despite the economic gains, official data showed unemployment rising to 7.1% from 6.3% over the past four years, highlighting ongoing challenges in job creation as Pakistan seeks to sustain its recovery and boost long-term growth.