Pakistan Kicks Off FY2026-27 Budget Process

The Government of Pakistan has officially initiated the FY2026-27 budget process by issuing the Budget Call Circular (BCC). This marks the beginning of preparations for the federal budget, outlining macroeconomic priorities, detailed timelines, and the integration of climate and disaster-related considerations. The Finance Division projects GDP growth of 5.1 percent for FY2026-27 and an inflation rate of 6.5 percent, signaling steady economic recovery and stabilization.

This budget cycle also introduces innovative climate-focused reforms. For the first time, federal agencies are required to tag revenues, subsidies, and expenditures for their environmental impact. These measures aim to improve accountability, promote green growth, and ensure that fiscal policies align with sustainability objectives while supporting Pakistan’s broader economic goals.

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Provisional Macroeconomic Framework for FY2026-27

The government’s provisional macroeconomic framework projects GDP growth to increase from 4.0 percent in FY2025-26 to 5.1 percent in FY2026-27. Inflation is expected to ease from 6.1 percent to 6.5 percent over the same period, aided by moderating global commodity prices and ongoing structural reforms.

These projections are designed to guide federal entities in preparing realistic revenue and expenditure estimates. Ministries are instructed to submit actuals for FY2024-25, revised estimates for FY2025-26, and budget proposals for FY2026-27, ensuring consistency across all sectors and improving fiscal discipline.

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Climate and Green Budgeting Initiatives

For the first time, Pakistan’s budget process introduces detailed guidance on green budgeting. All federal entities must identify and classify revenues with environmental relevance, covering both tax and non-tax streams. The goal is to ensure that public finances contribute to climate resilience and sustainable development.

Key features of the climate-focused revenue tagging include:

• Categorizing revenues under Energy, Transport, Pollution, and Natural Resources.
• Including petroleum levies, greenhouse gas emissions, road usage fees, and water/forest resource charges.
• Evaluating non-tax revenues based on environmental impact to align with climate objectives.

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Table: Green Revenue Categories

Category	Examples of Revenues	Environmental Relevance
Energy	Petroleum levies, emissions from energy use	Encourages cleaner energy practices
Transport	Motor vehicle taxes, congestion charges	Reduces traffic pollution and emissions
Pollution	Waste management fees, noise pollution charges	Promotes environmental protection
Natural Resources	Levies on water and forest extraction	Encourages sustainable resource usage

Climate Tagging of Subsidies

Subsidies, a significant portion of the federal budget, will now also be tag for climate impact. Using Form III-C, ministries must classify subsidies as either adaptation or mitigation. Adaptation covers agricultural risk management, crop insurance, and climate-resilient infrastructure, while mitigation focuses on clean energy, renewables, energy efficiency, mass transit, and electric vehicles.

Additionally, each subsidy will be assessed for its impact:

• Directly favourable
• Indirectly favourable
• Neutral
• Mixed
• Potentially unfavourable

This approach ensures that fiscal support reinforces environmental goals rather than contributing to climate risks.

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Disaster Budgeting and Transparency

Pakistan’s vulnerability to climate-induced disasters necessitates a dedicated disaster budgeting framework. The Finance Division has emphasized tagging disaster-related spending to cover both pre-disaster risk reduction and post-disaster recovery and reconstruction.

Pre-disaster initiatives include prevention, mitigation, and preparedness measures. Post-disaster expenditures cover response, recovery, and reconstruction activities. Each cost centre is assign a specific code to enhance tracking and transparency, ensuring that funds are efficiently utilize in emergency situations.

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Budget Timeline for FY2026-27

The FY2026-27 budget follows a structured timeline to ensure timely preparation and approval:

• January 2026: Preparation of provisional macroeconomic framework
• February 20, 2026: Submission of revised revenue and expenditure estimates
• March 30 – April 12, 2026: Budget Review Committee meetings
• April 15, 2026: Notification of exchange rate assumptions
• April 20, 2026: Approval of Budget Strategy Paper
• April 21–25, 2026: Issuance of budget ceilings for current and development budgets
• May 2026: Meetings of APCC (first week) and NEC (second week)
• End of May 2026: Finalization of all budget documents
• June 30, 2026: Submission of quarterly budget estimates

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Table: Key Budget Milestones FY2026-27

Date	Milestone
Jan 2026	Provisional macroeconomic framework prepared
Feb 20, 2026	Ministries submit revised estimates
Mar 30 – Apr 12, 2026	Budget Review Committee meetings
Apr 20, 2026	Budget Strategy Paper approval
Apr 21–25, 2026	Issuance of budget ceilings
May 2026	APCC & NEC meetings
May-end 2026	Finalization of budget documents
Jun 30, 2026	Submission of quarterly estimates

Significance of the FY2026-27 Budget Process

The FY2026-27 budget process represents a step forward in integrating fiscal planning with environmental and disaster resilience. By systematically tagging revenues, subsidies, and expenditures, the government aims to strengthen accountability and ensure that public funds support sustainable growth.

Moreover, this approach allows policymakers to balance economic recovery, climate mitigation, and disaster preparedness, helping Pakistan navigate global economic challenges while promoting sustainable development.

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FAQs

What is the FY2026-27 Budget Process?
It is the federal government’s preparation for the next fiscal year, including macroeconomic planning, climate-focused reforms, and disaster budgeting.

What are the GDP and inflation projections for FY2026-27?
The government projects GDP growth at 5.1 percent and inflation at 6.5 percent for FY2026-27.

How does climate tagging impact the federal budget?
It ensures revenues, subsidies, and expenditures are assessed for environmental impact, promoting sustainable and green fiscal policies.

What is the budget timeline for FY2026-27?
The process includes submission of estimates, committee reviews, strategy approval, issuance of ceilings, and finalization of documents by June 30, 2026.

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