Budget 2026: Continuing the trajectory of fiscal consolidation

THE 2026 Budget has been hailed for continuing the trajectory of fiscal consolidation and reforms. Compliance with the IMF-mandated revenue-based fiscal consolidation has been instrumental in restoring macroeconomic stability and normalcy from the depths of economic devastation experienced in 2022.

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According to the 2025 Revised Budget Estimates, the Budget deficit for this year is expected to be Rs. 1,448 billion, compared to Rs. 2,040 billion in 2024. The Treasury is not expected to borrow at all from banks to finance the shortfall, thus, leaving more financial resources available to fund the requirements of the private sector-led investments.

In a salutary move, the Government has envisaged to consolidate the functions of the Industrial Development Board (IDB), National Enterprise Development Authority, and Small and Medium Enterprise Development Division and bring them under the supervision of the IDB. Hopefully, the move would establish an integrated framework for the development of SMEs in the country. The Government intends to provide credit guarantees for loans amounting to around Rs. 7 billion next year to enable SMEs to obtain loans without collateral under the National Credit Guarantee Institution, which began its commercial operations last January.