5.1pc GDP growth, 6.5pc inflation projected
ISLAMABAD: The Finance Division has issued the Budget Call Circular for fiscal year 2026-27, projecting GDP growth at 5.1 percent, inflation at 6.5 percent, besides, issued detailed instructions on green components of tax and non-tax revenues, climate-linked subsidies and disaster budgeting.
The new instructions, circulated to all ministries and Principal Accounting Officers (PAOs), require federal entities to identify, classify and tag revenues and expenditures with climate and environmental relevance, alongside the submission of 2024-25 actuals, FY2025-26 revised estimates and FY2026-27 budget estimates.
The expanded climate and disaster budgeting framework comes alongside the government’s Provisional Macroeconomic Framework, which projects GDP growth to rise to 4.0 percent in FY2025-26 and 5.1 percent in FY2026-27, with inflation contained at 6.1 percent and 6.5 percent, respectively, supported by easing global commodity prices and structural reforms.
Officials said the strengthened tagging of revenues, subsidies and disaster-related spending will help policymakers better align fiscal policy with climate resilience, green growth and sustainability objectives, while improving accountability in the use of public resources as Pakistan navigates economic recovery amid mounting climate risks.
According to the circular, federal revenues are divided into tax revenues under the FBR and non-tax revenues administered by the Finance Division. The climate relevance of non-tax revenues will now be determined by assessing the environmental impact of the underlying activity, with levies on environmentally harmful activities—such as fossil fuel use, plastics or hazardous waste—treated as positively correlated with climate objectives. To standardise reporting in line with global practices, the Finance Division has introduced four base categories for classifying green-related tax and non-tax revenues: energy, transport, pollution and natural resources.
These cover a wide spectrum, including petroleum levies, energy-related greenhouse gas emissions, motor vehicles and road usage, congestion charges, non-energy emissions, waste management fees, noise pollution charges, and levies on extraction and abstraction of natural resources such as water and forests.
The BCC also formally extends climate tagging to subsidies, which constitute a sizeable portion of the federal budget. Having already tagged climate-relevant expenditures under Running of Civil Government (RoCG) and PSDP since FY2023-24, the government has now introduced Form III-C to assess subsidies from FY2025-26 onwards.
Under the new methodology, ministries are required to identify each subsidy by cost centre, sector and budget estimate and classify it as either climate adaptation or mitigation. Adaptation examples include subsidies for agricultural risk management, crop insurance and climate-resilient infrastructure, while mitigation covers clean energy, renewables, energy efficiency, power transmission, mass transit and electric vehicles.
Subsidies must also be tagged based on their climate impact as directly favourable, indirectly favourable, neutral, mixed or potentially unfavourable, enabling the government to assess whether fiscal support aligns with environmental and climate goals or risks exacerbating environmental pressures. In parallel, the Finance Division has reiterated instructions for Disaster Budgeting, citing Pakistan’s high vulnerability to climate-induced natural disasters. Disaster-related spending will continue to be tagged across the federal budget, covering both pre-disaster risk reduction —including prevention, mitigation and preparedness—and post-disaster response, recovery and reconstruction. Each category will be assigned a specific code at the cost-centre level to improve transparency and tracking.—TAHIR AMIN
