• Justifies defence budget hike amid regional tensions; reiterates support for Iran, condemns Israeli aggression
• Cabinet okays plan to eliminate Rs1.275tr power sector debt over six years
ISLAMABAD: Prime Minister Shehbaz Sharif announced on Wednesday that the income tax rate for salaried individuals earning between Rs600,000 and Rs1.2 million annually had been reduced to 1 per cent from the previous 5pc.
There has been some confusion over the income tax rate for the first slab.
While the Finance Bill indicated that the rate was reduced from 5pc to 1pc, Finance Minister Muhammad Aurangzeb announced during his budget speech that the new rate would be 2.5pc.
It later emerged that the federal cabinet had approved an increase to 2.5pc before the budget presentation to offset the additional fiscal burden caused by the recent hike in government employees’ salaries.
This was backed up by the FBR chairman, who told a parliamentary committee that only Rs1,000 tax would be applicable on a monthly income of Rs100,000.
Addressing the federal cabinet in a meeting broadcast live on state-run and private TV channels, the prime minister also defended the government’s decision to raise the defence budget in the newly presented federal budget, citing the need for better equipment for the country’s armed forces amid escalating regional conflicts.
Calling the regional situation “very alarming” due to the intensified conflict between Iran and Israel, the prime minister warned that the crisis posed a threat to both regional and global peace.
He reiterated Pakistan’s complete solidarity with the brotherly country Iran and its people against Israeli aggression and called upon the international community to make efforts to ensure an immediate ceasefire in the ongoing armed conflict.
During the cabinet meeting, the premier also highlighted that the Public Sector Development Programme had been expanded to Rs1 trillion in the new budget, pledging to meet development goals.
The government has recently announced the federal budget 2025-26 and now it is being reviewed at different committees of the Senate and the National Assembly before its passage by the two houses of the parliament.
The government has proposed a defence allocation of Rs1.29tr for the next fiscal year — an 11.8pc increase over the original allocation for the outgoing year.
“Considering the fight against terrorism, we have increased the fiscal space to meet the requirements of the armed forces with regard to necessary equipment,” PM Shehbaz said.
He stressed that the recent great victory against India in the armed conflict was possible due to the professionalism of the armed forces and the support of 240m people of the country.
The premier reaffirmed Pakistan’s unwavering solidarity with Iran, condemning Israeli aggression and urging the international community to secure an immediate ceasefire. He revealed that he had spoken to Iranian President Masoud Pezeshkian and Turkish President Recep Tayyip Erdogan about the situation.
He described the scenes in Gaza as heartbreaking, noting that over 50,000 innocent Palestinians had been killed. “Brutality is being unleashed. When will the world’s conscience awaken?” he asked.
The prime minister informed the cabinet that Deputy Prime Minister and Foreign Minister Ishaq Dar would attend the OIC foreign ministers’ meeting in Turkiye on June 21-22.
As for economic measures, the premier said the government had convinced the International Monetary Fund not to impose taxes on the agricultural sector, including fertiliser and pesticides, stressing that farmers were already under strain. He expressed gratitude to the IMF for agreeing to the request.
Without naming the PTI government, PM Shehbaz said the incumbent government did not act like those who had broken the promises (with the IMF) and took the country to the verge of default. He said his administration had averted a financial crisis and was steering Pakistan towards economic stability.
He also praised a delegation led by Bilawal Bhutto-Zardari for effectively representing Pakistan’s position on Indian unilateral actions during visits to the US and Europe.
Power sector debt plan
Meanwhile, in a key decision, the federal cabinet approved Pakistan’s largest financial scheme to stabilise the power sector by eliminating Rs1.275tr in circular debt over the next six years, without adding burden to the national budget.
Under the plan, Rs683 billion of Power Holding Company’s debt will be refinanced, and outstanding payments to independent power producers (IPPs) will be settled. The scheme aims to implement sustainable reforms, ease financial stress and restore investor confidence in the energy sector.
The prime minister commended Chief of the Army Staff Field Marshal Asim Munir for his recent address to the Pakistani diaspora in the US, calling his commitment to safeguarding Pakistan’s interests a source of national pride.
The cabinet also expressed appreciation for Finance Minister Muhammad Aurangzeb and his economic team for presenting a “people-friendly budget” for the upcoming fiscal year. Commendation was also extended to Minister for Religious Affairs Sardar Yousaf for the arrangements made for Haj pilgrims this year.
The cabinet also approved the appointment of Kamaluddin Tipu as the chairman of the Commission for the Protection of Journalists and Media Professionals, on the recommendation of the Ministry of Human Rights.
Additionally, the cabinet granted an exemption under Section 21 of the Pakistan Public Procurement Regulatory Authority Ordinance 2002 to the National Power Parks Management Company Limited for procurement services related to the acquisition of the Rousch Power Plant.
It also ratified the decisions made during the Cabinet Committee on Legislative Cases meeting held on May 21.
Published in media, June 19th, 2025
American Dollar Exchange Rate