ISLAMABAD (PEN) : In a significant policy development, the International Monetary Fund (IMF) has agreed to two of Pakistan’s key budgetary proposals: an increase in defence spending and income tax relief for salaried individuals, according to official sources familiar with ongoing budget negotiations.
Defence Spending Gains IMF Nod
Pakistan had urged the IMF to acknowledge rising national security requirements as an essential component of its fiscal priorities. In response, the Fund accepted the government’s stance and approved a rise in the defence budget for the next fiscal year. Finance Minister Muhammad Aurangzeb previously emphasized that supporting the armed forces is not only a strategic necessity but also a broader national imperative.
Tax Relief for Salaried Class
Alongside the defence allocation, the IMF has also consented to revise income tax structures to benefit salaried individuals, offering long-anticipated relief amid persistent inflation and economic strain.
Sources indicate that the annual tax-free income threshold under Section 129 of the Income Tax Act is set to increase, raising the monthly tax-exempt salary limit from Rs50,000 to Rs83,000.
Proposed tax adjustments across income brackets include:
Rs100,000/month: tax rate cut from 5% to **2.5%*
Rs183,000/month: tax rate lowered from 15% to **12.5%*
Rs267,000/month: tax reduced from 25% to **22.5%*
Rs333,000/month: tax dropped from 30% to **27.5%*
Above Rs333,000/month: tax rate decreased from 35% to **32.5%*
Commitment to Reform Targets
The IMF’s approval reportedly followed strong assurances from Pakistan that all performance benchmarks and reform milestones under the ongoing review will be met within the agreed timeline. Officials stated that this agreement reflects growing mutual confidence between the government and the Fund.
The relief measures are expected to ease financial pressure on the salaried segment of the population, while the increased defence allocation aligns with strategic priorities amid regional tensions.
