Punjab Budget 2025–2026: A Financial Analysis

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Punjab Budget 2025–2026: A Financial Analysis

The Punjab government, led by Chief Minister Maryam Nawaz Sharif, has unveiled a progressive but contentious budget of PKR 5,335 billion for FY 2025–2026. The budget tries to find a balance between development aspirations and responsible finance. Though the government is to be appreciated for its all-time high development expenditure, the strategy on public sector wages, pension, and social sectors indicates significant gaps that need to be critically analyzed.

Strengths: Development-Led Growth Strategy

The most eye-catching aspect of the Punjab budget is the 47.2% hike in the development budget to a record PKR 1,240 billion. This is a daring step that reflects the government's determination towards infrastructure expansion, urban development, and foreign-funded ventures (with PKR 171.7 billion set aside for such projects).

Key positive highlights are:

Education budget raised by 21.2% to PKR 811.8 billion, reflecting high priority for long-term human capital development.

Health budget also registered a substantial 17% hike to PKR 630.5 billion, though the operational issues persist.

Sizeable transfers of PKR 934.2 billion to local government serve the purpose of strengthening municipal service delivery.

A budgeted surplus of PKR 740 billion, in addition to a well-defined target subsidy of PKR 72.3 billion, is a testament to sound fiscal management.

Revenue targets are ambitious yet organized, with the goal of PRA being PKR 340 billion (13% growth), and own revenue target of PKR 828.1 billion—a move towards increased financial independence.

This development-oriented budgeting system is a stark change from previous stagnation, and the government well deserves praise for focusing on infrastructure and public service overhauling.

Concerns: Salary and Pension Allocations Shortfall

While the general optimism surrounds the government, its handling of public sector salaries shows no correlation with the reality of life.

The 10% wage hike for government servants is disappointingly low in light of the ever-soaring inflation and the cost of living in Pakistan. With inflation at around double digits, the actual rise in wages amounts to nothing when taking into consideration the lower- and middle-level staff.

The 5% increase in pensions for retired government employees is also inadequate. Pensioners—already the poorest of the poor—are to have their purchasing power further reduced. Furthermore, Punjab's unsustainable pension model continues to put provincial finances under pressure. Long-overdue pension reforms, such as the transition to a contributory or hybrid model, are still to emerge.

Critically, the health workforce, which has been at the center of public health emergencies, is left under-paid. While the overall health budget recorded a respectable increase, frontline health workers have not been shown any special favor or incentives, which may create additional resentment and workforce problems.

Pension System: A Fiscal Time Bomb

Punjab's pension scheme is still one of the most regressive and onerous components of its fiscal setup. With a growing number of retirees and increasing life expectancy, pension obligations are likely to swell. However, the government persists with incremental hikes without changing the structure.

There is a need for change in the following areas:

• Parametric reforms (retirement age, service years, contribution ratio).

• Implementation of a contributory pension plan for new recruits.

• Improved management of pension funds to help minimize the use of the annual budget.

• Neglect of these areas will render future budgets ever more inflexible and development expenditure more exposed.

Furthermore, it is critical to note that employees in the private sector in Punjab — as opposed to government servants — lack an organized retirement support system. After retirement, most private sector employees are without pensions, health insurance, or any other type of financial security. This glaring social protection gap warrants urgent policy action. The Punjab government should look to the long term and start establishing a universal social security system, as practiced in Western nations, where citizens are given basic state assistance after retirement irrespective of their working life. A contributory national pension system for all working citizens, funded by employers and the state, would close this disparity and lead to a more equitable society.

Conclusion
Punjab's 2025–2026 budget is a vision of bold development and holds the hope of education, infrastructure, and local government reform. But the meager relief for public sector workers, particularly in health and education, and the lack of pension system reform are serious shortfalls.

Briefly, while the government has made the right moves toward structural progress, it needs to address its social contract with employees and retirees—both in public and private sectors—with great urgency. A really people's budget should not only deliver roads and buildings but decent wages, welfare, and long-term financial security to everyone.