By Ch Mohsin Bashir
The federal government has presented the budget for fiscal year 2026-27 at a time when the country is facing severe economic pressure, lack of investment, industrial slowdown, rising unemployment, and a continuous decline in public purchasing power. The government’s narrative is that this budget is an important step toward economic stability, fiscal discipline, and meeting targets agreed with international financial institutions, particularly the IMF. However, a neutral review of the budget figures and priorities presents a different picture.
In reality, this budget appears to focus more on debt repayment, protecting state expenditures, and maintaining the existing economic structure rather than promoting development, production, investment, and employment. While it is presented as a balanced budget, the balance seems to be in accounting terms rather than in economic growth.
The total size of the federal budget for 2026-27 is approximately Rs18.77 trillion. The government’s net revenue receipts stand at around Rs11.75 trillion, while expenditures are significantly higher. To bridge this gap, the government will need additional borrowing, bank financing, external resources, and potential privatization proceeds. In other words, the state is not self-sufficient in meeting its current expenses and continues to rely heavily on debt.
This is the fundamental reality often hidden behind complex budget terminology.
The biggest concern is that Pakistan is gradually transforming from a development-oriented state into a debt servicing state. More than Rs8 trillion has been allocated for interest payments alone, which constitutes nearly two-thirds of the federal government’s net income. This means that a major portion of public revenue is being used to repay past debts instead of being invested in education, health, clean drinking water, infrastructure, technology, agriculture, or industry.
Such a situation is alarming for any country because when most revenue is consumed by non-productive expenses, development capacity begins to shrink. This is exactly what is happening in Pakistan today.
The second major issue is tax policy. The government has set a revenue target of more than Rs15 trillion for the FBR. While this appears to be an effort to increase revenues, the question remains: where will this money come from?
As in previous years, the burden is likely to fall on sectors already within the tax net, including salaried individuals, registered businesses, importers, industrialists, utility consumers, and the documented economy. In contrast, the undocumented economy, wholesale markets, major agricultural incomes, segments of the real estate sector, and other privileged areas are expected to remain largely protected.
The result is that those already inside the system bear an increasing burden, while those outside continue operating informally, making it more beneficial for them to remain undocumented. Thus, tax reforms effectively remain limited to a narrow base.
The third weakness of the budget is the low level of development spending. The Public Sector Development Programme (PSDP) has been limited to around Rs1 trillion. Compared to the overall budget size, this share is very small. In a country facing rapid population growth, water shortages, energy crises, weak infrastructure, and industrial competitiveness challenges, such limited investment in development weakens future prospects.
A concerning aspect is that a significant portion of development funds is also influenced by political priorities rather than productivity enhancement. If resources were focused on export industries, rail freight, logistics, ports, water management, agriculture, and IT infrastructure, the economy could gain long-term benefits. However, current priorities do not show a significant shift in this direction.
The structure of government expenditure also raises questions. Defense, pensions, civil administration, subsidies, and various grants consume a large portion of the budget. While some of these expenses are unavoidable, their continuously rising share and lack of structural reform is a serious issue.
Even after the 18th Amendment, duplication of institutions and overlapping functions remains at federal and provincial levels. If fiscal space is truly limited, a comprehensive review of the federal structure becomes necessary. Without reducing unnecessary institutions, loss-making public sector enterprises, and non-productive expenditures, claims of fiscal stability remain incomplete.
The business community also finds little encouragement in this budget. Industry is already struggling with high energy costs, expensive financing, complex tax systems, and weak demand. Any further increase in indirect taxes, withholding taxes, and compliance costs may discourage new investment. Small and medium enterprises may prefer remaining in the informal sector, which would negatively impact economic documentation.
The government claims inflation is coming under control, but its effects are not yet visible in the lives of ordinary citizens. Prices of electricity, gas, fuel, rent, education, and food continue to remain high. Therefore, even if official data shows inflation easing, daily life remains expensive for the common person.
Real reform requires expanding the tax base, rationalizing state expenditures, addressing structural weaknesses in the energy sector, restructuring or privatizing public enterprises, and focusing development spending on productive sectors. At the same time, an environment must be created that encourages investment and exports in line with regional competitiveness.
The core issue is not a shortage of resources but poor priorities. As long as the budget’s main objective remains managing debt rather than increasing productive capacity, claims of stability will not translate into real improvement in people’s lives.
This budget signals that the existing system is being sustained for another year. But the question remains: can this path lead Pakistan toward sustainable growth, employment, and prosperity? Perhaps not.
Because there is a difference between stability and stagnation. Stability builds foundations for growth, while stagnation only postpones crises. Unfortunately, the current budget appears to reflect the latter more than the former.
Therefore, it is more appropriate to describe it not as a reform budget, but as a continuation of a debt-dependent system.
