BUDGET FY26: Sindh unveils Rs3.45tr budget with tax relief

KARACHI: Sindh Chief Minister Syed Murad Ali Shah presented Rs3.45 trillion provincial budget for the fiscal year 2025–26 at the Sindh Assembly on Friday amid vociferous protests and desk-thumping by opposition lawmakers.

It is a Rs38.458 billion deficit budget, as total revenue receipts are expected around Rs3,411.542 billion.

The new budget marks a 12.9 percent increase over the current fiscal year’s outlay of Rs3.056 trillion and promises relief for government employees, pensioners, small businesses, and the general public through both fiscal incentives and service expansions.

Presenting what he termed a forward-looking and inclusive financial plan, Shah said the budget aligns with the commitments under the IMF’s 2024 programme and aims to sustain development momentum while cushioning inflationary impacts.

SALARY, PENSION INCREASES ANNOUNCED

Among key highlights, the chief minister announced a 12 percent ad-hoc relief allowance for all government employees (BPS-01 to BPS-16), 10 per cent ad-hoc relief for employees (BPS-17 to BPS-22) and 8 percent increase in pensions, benefiting thousands of current and former civil servants. The overall financial impact of these measures is estimated at Rs52 billion per annum.

He also confirmed the continuation of personal pay for employees in BPS-1 to BPS-6, ensuring their salaries do not fall below the Rs37,000 minimum wage threshold.

In a significant step, all pension dues for civil servants retired on or before June 30, 2025, have been cleared, amounting to Rs35 billion.

BUDGETARY ALLOCATIONS: A SECTOR-WISE OVERVIEW

The Rs3.45 trillion budget comprises allocations of Rs2.15 trillion for current revenue expenditures, up 12.4 percent from last year, and Rs520 billion for Annual Development Programme (ADP). The development focus remains on education, healthcare, flood rehabilitation, infrastructure, renewable energy, and regional uplift.

EDUCATION AND HEALTH

The education budget has been raised to Rs523.73 billion, a 12.4 percent jump from Rs458.2 billion last year. The health budget will rise to Rs326.5 billion from Rs302.2 billion. Medical education has been earmarked Rs18.2 billion.

INFRASTRUCTURE AND DEVELOPMENT

Rs520 billion is allocated for ADP 2025–26, with 475 new high-priority schemes.

Key allocations include Rs96.7bn for education sector development, Rs80.6bn for irrigation, Rs155.2bn for energy, Rs132.79bn for agriculture, and Rs23.1bn for fisheries.

Major development initiatives include:

Karachi Urban Infrastructure Development (Rs12bn), Renewable Energy Projects (Rs25bn), Flood-damaged infrastructure rehabilitation (Rs12bn), Divisional HQ uplift (Rs7.5bn), and CSR cost impact (Rs15bn).

Sindh also unveiled Rs45bn SDG-aligned projects, half of which are earmarked for clean water access and climate resilience.

TAX MEASURES AND RELIEF PROPOSALS

Shah’s budget includes pro-public tax adjustments and several relief measures aimed at promoting business and cultural activities, as well as supporting small taxpayers:

TAXES ABOLISHED

Professional tax, cotton fee, entertainment duty, local cess and drainage cess

TAX REDUCTIONS

Motor vehicle tax for commercial vehicles cut to Rs1,000, stamp duty on motor third-party insurance capped at Rs50, Sindh Sales Tax on Services (SST) for certain services reduced from 10 percent to 8 percent, SST on third-party vehicle insurance cut from 15 percent to 5 percent, exemption threshold for restaurants/caterers raised from Rs2.5 million to Rs5 million turnover.

Shah announced a transition to a negative list taxation regime — where all services are taxable except those explicitly exempted — expected to expand the tax base and reduce disputes.

REVENUE TARGETS AND COLLECTION REFORMS

Sindh’s own-source revenue for FY25 is projected at Rs618.87 billion, with Sindh Sales Tax (SST) expected to contribute Rs300 billion—a 35 per cent increase from the previous year.

Digitization remains a core focus. The “E-Pay Sindh” platform will soon cover 34 provincial levies, 14 of which are already automated.

Non-tax measures and initiatives

Sindh announced several non-tax reliefs, including reduced fees for: Mutation and Sales Certificates (from Rs1,000 to Rs500), Certified Copies (50 percent cut), Solvency and Heirship Certificates (from Rs1,000 to Rs500).

Additionally, Shah proposed abolishing mandatory third-party insurance for motorcycles, terming it difficult to enforce and burdensome for low-income users. Adoption of defined contribution pension scheme Sindh has formally adopted a defined contribution pension system for all new employees from FY24–25 onward, marking a shift away from the existing unfunded pension liability model.

KEY DEVELOPMENT AND STRATEGIC PROJECTS

Sindh’s strategic focus includes:

Shahrah-e-Bhutto Expressway – partially operational, 1,000 Electric Buses – 500 for Karachi, roll-out to complete in FY25–26, desalination plant, TP-4 Sewerage Treatment, EV charging stations, and solarization of schools under investor solicitation in 2025.

Under the People’s IT Program, PITP-II has been launched with Rs1.4 billion budget to train 35,000 youth in high-demand digital skills across four universities.

AGRICULTURAL REFORMS AND HARI CARD

Through the Benazir Hari Card, the government aims to provide laser land levelling services free-of-cost for farms up to 25 acres, offer subsidised machinery (up to 80 percent) and drip irrigation systems.

Expected outcomes include 30–35 percent higher yields and 25 percent boost in farmer incomes.

REVISED ESTIMATES FOR 2024–25

The revised estimates for FY 2024–25 reveal the challenges Sindh faced due to shortfalls in federal transfers:

Provincial Expenditure: Rs2.916 trillion (down from Rs3.056trn), Current Revenue Expenditure: Rs1.86 trillion, Capital Expenditure: Rs237.9 billion (due to rising forex costs), Development Expenditure: Rs846.9 billion.

Shah said Sindh received Rs1.363 trillion from the federal divisible pool so far, Rs282 billion less than budgeted, compelling austerity and revised projections.

FEDERAL TRANSFERS AND GRANTS

Federal transfers revised at Rs1.796 trillion, down from Rs1.9 trillion, Divisible Pool share revised to Rs1.623 trillion, foreign project assistance revised at Rs296.2 billion.

PUBLIC WELFARE ALLOCATIONS

KMC was given Rs26 billion for operations and development, Rs827 million allocated for pensioners of the local government board, Rs550 million set aside for organising religious events. Rs800 million in grants allocated for: Sindh Judicial Academy, bar associations, legal aid society, and press clubs and deserving journalists.

INCLUSIVE CITY, HOUSING & PPP INVESTMENTS

Sindh will establish an Inclusive City for persons with disabilities (PWDs) on 75 acres in Karachi. Under housing programs, over 560,000 houses have already been built following floods of 2022 with Rs128 billion spent in the current year. Another 1.1 million houses are under construction.

Sindh Chief Minister said that Public-Private Partnership projects worth Rs625 billion are also underway, signaling long-term investment confidence.