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The Finance Division has officially issued the Budget Call Circular (BCC) for the fiscal year 2026-27. This new circular sets a positive economic tone, projecting a GDP growth of 5.1% for the upcoming fiscal cycle. Furthermore, the government anticipates inflation will settle at 6.5%.
These projections come alongside detailed new instructions for federal entities. The government is shifting its focus toward a greener economy. Consequently, the circular mandates strict tagging of green tax components, non-tax revenues, and climate-linked subsidies.
Economic Outlook & Green Reforms
The government’s Provisional Macroeconomic Framework supports these new budgeting guidelines. Authorities expect GDP growth to reach 4.0% in FY2025-26 before climbing to 5.1% in FY2026-27. Simultaneously, the framework forecasts inflation to remain contained at 6.1% and 6.5% for the respective years. Officials attribute this stability to easing global commodity prices and ongoing structural reforms.
To ensure accountability, the Finance Division has circulated these instructions to all ministries and Principal Accounting Officers (PAOs). They must now identify, classify, and tag all revenues and expenditures based on climate relevance. Additionally, ministries must submit actuals for 2024-25, revised estimates for FY2025-26, and budget estimates for FY2026-27.
Finance Division & FBR: Classifying Green Revenues
The circular introduces a standardised approach to federal revenues. It divides these into tax revenues under the FBR and non-tax revenues administered by the Finance Division. The government will now assess non-tax revenues based on the environmental impact of the underlying activity. For instance, levies on fossil fuels or plastics will be treated as positively correlated with climate objectives.
To align with global standards, the Finance Division introduced four base categories for green-related revenues:
- Energy: Includes petroleum levies and greenhouse gas emission charges.
- Transport: Covers motor vehicles, road usage, and congestion charges.
- Pollution: Involves waste management fees and noise pollution charges.
- Natural Resources: Includes levies on water and forest extraction.
New Protocols for Subsidies & Disaster Budgeting
The BCC formally extends climate tagging to subsidies, a major part of the federal budget. The government has introduced “Form III-C” to assess these subsidies starting from FY2025-26. Ministries must now classify subsidies as either Climate Adaptation (e.g., crop insurance, resilient infrastructure) or Mitigation (e.g., clean energy, electric vehicles).
Moreover, officials must tag these subsidies based on their impact, whether directly favourable, neutral, or potentially unfavourable to environmental goals.
Finally, the Finance Division reiterated instructions for Disaster Budgeting. Given Pakistan’s vulnerability to climate risks, the budget will track spending for both pre-disaster risk reduction and post-disaster recovery. Specific codes will be assigned to these categories to improve transparency. This comprehensive framework aims to align Pakistan’s fiscal policy with climate resilience and green growth.
