The economy of the world's fifth-most populous country, weakened by a balance of payments crisis, is trying to take on crushing external debt, after months of political chaos that have spooked off potential foreign investors.
Inflation has soared, the rupee has plummeted and the country can no longer import, drying up industrial production.
About 950 billion rupees are earmarked for development projects that are likely to appeal to voters in this year's general election, among other electioneering measures such as raising civil servants' pay by up to 35 per cent and 17.5 per cent for retired civil servants.
Even if the elections are approaching, it is "a responsible budget rather than an electoral budget," Finance Minister Ishaq Dar told the National Assembly on Friday.
The budget "will be useless if inflation is not reduced, the poor will only be relieved if inflation is reduced," said Akhtar Khan Nawaz, a worker at a fruit and vegetable market in the capital Islamabad.
Prime Minister Shehbaz Sharif blamed his predecessor Imran Khan - ousted by a no-confidence motion in April - saying he was optimistic about an extension in June of an International Monetary Fund (IMF) loan, crucial to get out of the crisis.
According to him, the management of the IMF has "given its verbal commitment... There are no obstacles."
To unlock a new tranche of the $6.5 billion loan agreed in 2019, however, the IMF asked the country to obtain additional external financing, remove some electoral subsidies and let the rupee float freely against the dollar.
Islamabad failed to meet any of its growth targets in 2022-2023, according to a government report released on Thursday, with GDP expected to reach just 0.3 percent in the fiscal year ending at the end of June.
Fiscal assumptions point to 3.5% for the next fiscal year, well above the 2% forecast by the World Bank in a report published this week, and annual inflation returning to 21% instead of 37.97%.
Pakistan's economy has been hit hard by record floods in 2022, which left nearly a third of the country underwater, devastating agriculture and leaving tens of millions homeless.
The government is also under pressure from a tense political situation, said Nasir Iqbal, an economist at the Pakistan Institute of Development Economics (PIDE).
The popularity of Imran Khan's campaign to return to power has morphed into street violence since his brief arrest in May, leading to mass arrests and trials before military courts, in a country where the military has already succeeded in at least three coups.
© 2023 AFP