Federal Budget 2026-27 Preparations Begin
The Finance Division has formally started preparations for the Federal Budget 2026-27 by issuing the Budget Call Circular. This document sets the direction for fiscal planning by outlining macroeconomic priorities, budget timelines, and new reporting requirements for all federal ministries and departmen
The issuance of the Budget Call Circular marks the official beginning of the annual budget process. It signals a stronger focus on economic stability, climate resilience, and improved transparency as Pakistan prepares its next federal budget.
- Budget Call Circular officially issued
- Federal budget process for FY2026-27 begins
- Ministries directed to follow new guidelines
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Macroeconomic Outlook for Federal Budget 2026-27
Along with the Budget Call Circular, the government released its provisional macroeconomic framework. According to the projections, GDP growth is expected to increase from 4.0 percent in FY2025-26 to 5.1 percent in FY2026-27, reflecting gradual economic recovery.
Inflation is projected to remain under control, with estimates of 6.1 percent in FY2025-26 and 6.5 percent in FY2026-27. These projections are supported by moderating global commodity prices and ongoing structural reforms.
- GDP growth projected at 5.1 percent for FY2026-27
- Inflation expected to remain below 7 percent
- Economic stability linked to reforms
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Provisional Macroeconomic Framework Explained
The provisional macroeconomic framework provides a roadmap for fiscal planning ahead of the Federal Budget 2026-27. It guides revenue targets, expenditure planning, and economic assumptions used by ministries while preparing budget estimates.
This framework helps ensure consistency across government planning and aligns fiscal decisions with national economic objectives. It also supports informed decision-making during the budget review process.
- Framework guides budget assumptions
- Supports coordinated fiscal planning
- Shared with all federal entities
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Introduction of Climate and Green Budgeting
For the first time, the Federal Budget 2026-27 preparation includes detailed guidance on climate and green budgeting. The Finance Division has instructed ministries to identify and tag revenues and expenditures with climate and environmental relevance.
This move aims to align fiscal policy with climate resilience and sustainability goals. Strengthened climate tagging will also improve accountability as Pakistan faces rising climate risks.
- Climate budgeting introduced in BCC
- Focus on sustainability and resilience
- Improved fiscal accountability
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Climate Tagging of Revenues and Expenditures
All ministries and Principal Accounting Officers have been directed to tag climate-relevant revenues and expenditures. This applies to FY2024-25 actuals, FY2025-26 revised estimates, and FY2026-27 budget estimates.
The tagging process ensures that climate-related financial flows are clearly identified and tracked. This will help policymakers better assess the environmental impact of fiscal decisions.
- Mandatory climate tagging introduced
- Applies to multiple fiscal years
- Improves financial transparency
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Green Revenue Classification Framework
The Finance Division has introduced standardized categories to classify green-related tax and non-tax revenues. These categories align with international reporting practices and help assess environmental impact.
Officials will evaluate non-tax revenues based on the environmental nature of the underlying activity. They consider levies on harmful activities, such as fossil fuel use and plastic waste, as positively supporting climate objectives.
- Standardized reporting categories
- Environmental impact-based assessment
- Alignment with global practices
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Green Revenue Categories
| Category | Examples |
|---|---|
| Energy | Petroleum levies, emissions from energy use |
| Transport | Motor vehicles, road usage, congestion charges |
| Pollution | Waste management, noise pollution fees |
| Natural Resources | Water extraction, forest usage |
Climate Tagging of Subsidies in Federal Budget 2026-27
Subsidies form a significant part of the federal budget, and the Finance Division has now extended climate tagging to this area. Form III-C has been introduced to assess subsidies from FY2025-26 onwards.
Ministries are required to classify each subsidy by sector, cost centre, and budget estimate. This allows a clearer understanding of how subsidies support or impact climate goals.
- Climate tagging extended to subsidies
- Form III-C introduced
- Sector-wise subsidy assessment
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Adaptation and Mitigation Subsidy Classification
Subsidies must now be classified as either climate adaptation or mitigation. Adaptation includes measures such as agricultural risk management and climate-resilient infrastructure.
Mitigation covers areas like renewable energy, energy efficiency, power transmission, mass transit, and electric vehicles. This classification supports better climate-aligned budgeting.
- Adaptation and mitigation categories defined
- Covers agriculture and infrastructure
- Encourages clean energy investment
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Impact-Based Evaluation of Subsidies
In addition to classification, subsidies will be tagged by their environmental impact. Categories include directly favourable, indirectly favourable, neutral, mixed, or potentially unfavourable.
This approach allows the government to evaluate whether fiscal support aligns with climate objectives or increases environmental pressure.
- Impact-based subsidy tagging
- Identification of unfavourable support
- Supports informed policy decisions
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Disaster Budgeting and Climate Risk Management
The Budget Call Circular also reinforces disaster budgeting due to Pakistan’s vulnerability to climate-induced shocks. Disaster-related spending will continue to be tagged across the federal budget.
This includes both pre-disaster risk reduction and post-disaster response activities. Each category will be assigned specific codes at the cost-centre level.
- Disaster budgeting instructions reiterated
- Covers prevention and recovery
- Improved tracking and transparency
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Federal Budget 2026-27 Timeline and Deadlines
The Finance Division has issued a detailed budget timeline to ensure timely preparation. All ministries must submit revised estimates and development project details by February 20, 2026.
Budget Review Committee meetings will take place from March 30 to April 12, followed by key approvals and issuance of budget ceilings.
- Budget submissions due by February 20
- Review meetings scheduled
- Clear planning milestones set
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Key Federal Budget 2026-27 Dates
| Activity | Timeline |
|---|---|
| Mid-Year Review | February 2026 |
| Budget Review Committee | March 30 – April 12, 2026 |
| Budget Strategy Approval | April 20, 2026 |
| APCC Meeting | First week of May 2026 |
| NEC Meeting | Second week of May 2026 |
Finalization of Federal Budget 2026-27
Officials will finalize all budget documents by the end of May 2026, and ministries must submit quarterly budget estimates by June 30, 2026.
With the issuance of the Budget Call Circular, the government has formally launched a budget process that combines economic planning with climate-focused fiscal reforms.
- Budget documents finalized by May
- Quarterly estimates due by June 30
- Climate-focused fiscal approach adopted
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FAQs
What is the Federal Budget 2026-27 Budget Call Circular?
The Finance Division issues this official document to start budget preparations and set fiscal guidelines.
What GDP growth is projected for FY2026-27?
GDP growth is projected at 5.1 percent for FY2026-27.
What is climate tagging in the federal budget?
Climate tagging identifies revenues and expenditures linked to environmental and climate objectives.
When will the Federal Budget 2026-27 documents be finalized?
All budget documents are expected to be finalized by the end of May 2026.
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