By Asghar Ali Mubarak
As Pakistan moves towards the presentation of the federal budget for 2026-27, the most significant development is not the size of the budget, the proposed tax targets or the allocations for development projects. It is the political consensus that appears to have emerged between the federal government and the Pakistan Peoples Party. At a time when economic uncertainty continues to weigh heavily on households and businesses alike, the agreement reached between the coalition partners offers a measure of stability that has often been absent from Pakistan’s fiscal planning process.
The meeting held at the Presidency, attended by President Asif Ali Zardari, Prime Minister Shehbaz Sharif and PPP Chairman Bilawal Bhutto Zardari, appears to have removed the possibility of major political friction over the budget. Such harmony is valuable because economic recovery cannot be achieved through numbers alone. Investors, businesses and international lenders all seek one thing above all else: predictability. Political divisions that translate into uncertainty over fiscal policy can undermine confidence before a budget is even implemented.
Yet political agreement should not be mistaken for economic success. The real challenge begins after parliament approves the budget. Pakistan has witnessed many budgets in the past that promised growth, stability and relief but struggled during implementation. The coming fiscal year will test whether policymakers can move beyond short-term adjustments and address the deeper structural weaknesses that continue to constrain economic progress.
The proposed budget size of around Rs17.1 trillion reflects the immense scale of the state’s financial obligations. Equally ambitious is the proposed tax collection target of Rs15.3 trillion for the Federal Board of Revenue. Such targets may satisfy fiscal requirements on paper, particularly under the framework of the International Monetary Fund programme, but they also raise important questions. Can the tax machinery realistically achieve such a figure without placing additional burdens on sectors that are already heavily taxed? Can revenue collection be broadened in a way that improves fairness rather than simply increasing pressure on compliant taxpayers?
The government deserves credit for considering relief for salaried individuals who have borne a disproportionate share of taxation in recent years. Inflation has steadily eroded purchasing power, while wage growth has failed to keep pace with rising living costs. Proposals to revise income tax slabs and increase salaries and pensions by 10 to 15 per cent acknowledge these realities. However, any relief must be meaningful enough to be felt by ordinary families rather than becoming symbolic adjustments quickly consumed by inflation.
The budget’s growth target of 4.1 per cent also reflects cautious optimism. While achieving moderate growth is desirable, growth figures alone cannot become the sole measure of economic health. President Zardari’s emphasis on balancing economic expansion with public welfare deserves attention. Economic growth that fails to create jobs, improve education, strengthen healthcare and reduce poverty ultimately becomes a statistical achievement rather than a social one.
In this regard, the development allocations reveal both strengths and shortcomings. Increased funding for the Public Sector Development Programme suggests a willingness to invest in infrastructure and long-term projects. Significant allocations for power transmission, grid modernisation and hydropower projects indicate that policymakers recognise the central importance of energy security to economic growth. Pakistan’s industrial competitiveness remains closely tied to reliable and affordable electricity. Investments in transmission systems and hydropower infrastructure can therefore generate benefits that extend far beyond the energy sector.
Education funding also contains some encouraging elements. Allocations for ongoing Higher Education Commission projects, digital learning initiatives and youth skill development programmes demonstrate recognition of the need to invest in human capital. Yet the scale of these investments still appears modest when compared with the challenges facing Pakistan’s education sector. Millions of young Pakistanis continue to face barriers to quality education and meaningful employment. Without substantial and sustained investment in human development, economic growth targets will remain difficult to sustain.
More troubling is the limited attention given to climate resilience. Pakistan remains among the countries most vulnerable to climate change. Floods, extreme heat and water stress have become recurring features of national life. Despite these realities, the proposed climate-related allocations remain relatively small, and no major new initiatives appear to have been introduced. This disconnect between environmental risk and policy prioritisation is difficult to justify. The devastating floods of recent years demonstrated that climate change is no longer a future threat; it is a present economic and humanitarian challenge. Underinvestment in climate adaptation today risks far greater costs tomorrow.
The housing sector presents another area of concern. With a housing shortage exceeding ten million units and rapid urbanisation continuing across the country, the reduction in development funding for housing projects appears counterintuitive. Housing is not merely a social necessity. It is also a powerful driver of economic activity, generating employment across construction, manufacturing and services. Reducing investment in this sector risks slowing progress on both economic and social fronts.
Perhaps the most revealing insight comes not from the budget proposals themselves but from the recent findings of the Pakistan Institute of Development Economics regarding national savings. A savings rate of just 6.4 per cent highlights a deeper economic vulnerability. When citizens lack the capacity or incentive to save, domestic investment suffers, forcing greater reliance on external borrowing. The result is a cycle that repeatedly brings Pakistan back to international lenders and IMF programmes. Sustainable economic sovereignty cannot be achieved without stronger domestic savings and investment.
(The writer is a senior journalist covering various beats, can be reached at news@metro-morning.com)
