PRAC criticises missed opportunities in budget
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The Policy Research and Advisory Council (PRAC) has acknowledged several positive measures in the federal budget for 2025-26, but has raised significant concerns about the budget's failure to address critical challenges, particularly in the industrial sector, which could increase unemployment and destabilise Pakistan's already fragile economic outlook.
In a statement, PRAC Chairman Mohammad Younus Dagha acknowledged the budget's forward-thinking initiatives, including the Green Sukuk, which signals a positive shift towards sustainability and reflects the government's commitment to addressing environmental concerns. He also welcomed the tax relief for salaried individuals, noting it would offer financial relief to the broader population.
However, he pointed out that the lack of an increase in the minimum tax threshold may not sufficiently ease the burden on the most vulnerable and heavily taxed segments. Additionally, the reduction in withholding taxes on property transactions by 1.5% across all tax brackets and the removal of 7% federal excise duty on property transfers are expected to stimulate the real estate and construction sectors.
PRAC expressed concerns about the budget's failure to address the pressing economic challenges. The most significant issue raised was the budget's reliance on unrealistic revenue targets and growth projections, which Dagha described as "disconnected from economic realities."
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The Policy Research and Advisory Council (PRAC) has raised serious concerns over the Sindh government's budget for fiscal year 2025-26, citing a widening fiscal deficit, underfunding of local governments, and insufficient allocations for Karachi's development. According to PRAC, the Sindh budget projects a deficit of Rs38.5 billion, shifting from a balanced budget in FY24. While total receipts are expected to rise by 17% to Rs3.41 trillion, expenditures are projected to grow by 18.3%, reaching Rs3.45 trillion. PRAC Chairman Mohammad Younus Dagha acknowledged the government's efforts to simplify taxation, including the removal of five levies such as the Professional Tax and Entertainment Duty. However, he said these reforms are not sufficient to meet the province's long-term development needs. Budget FY2025-26: Sindh announces to expand sales tax to all major services Dagha also expressed concern over the marginal increase in local government allocations, which rose from Rs162.5 billion in FY25 to Rs165 billion in FY26. He noted that the share of local governments in Sindh's general revenue receipts has dropped to 5.8%, down from 6.7% last year and 16% in 2012, undermining fiscal decentralisation and service delivery. Despite a proposed increase in the minimum wage to Rs37,000, PRAC highlighted challenges in enforcement, with many industries still failing to comply. 'The budget reflects the government's priorities, and it is clear that both the federal and Sindh budgets continue to neglect Karachi and its critical challenges,' Dagha said. Although the Sindh government has increased its Annual Development Program (ADP) from Rs386.3 billion to Rs520 billion, the district-level development allocations remain unchanged at Rs55 billion. Karachi's mega projects will receive Rs8.3 billion in FY26, up from Rs5.6 billion last year, but PRAC said this remains inadequate for addressing the city's infrastructure issues, including water shortages, poor road conditions, and limited public transport. The Federal Public Sector Development Program (PSDP) allocation for Sindh also declined by 4%, from Rs79.7 billion to Rs76.6 billion. PRAC further criticised the continued delay in implementing Provincial Finance Commission (PFC) awards and noted persistent issues in the education and health sectors. Sindh's school enrollment has declined, while the child immunisation rate stands at 61%, well below Punjab's 90%. PRAC called on the Sindh government to adopt a more equitable and reform-oriented fiscal policy to ensure sustainable development and stronger local governance.
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11-06-2025
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PRAC criticises missed opportunities in budget
Listen to article The Policy Research and Advisory Council (PRAC) has acknowledged several positive measures in the federal budget for 2025-26, but has raised significant concerns about the budget's failure to address critical challenges, particularly in the industrial sector, which could increase unemployment and destabilise Pakistan's already fragile economic outlook. In a statement, PRAC Chairman Mohammad Younus Dagha acknowledged the budget's forward-thinking initiatives, including the Green Sukuk, which signals a positive shift towards sustainability and reflects the government's commitment to addressing environmental concerns. He also welcomed the tax relief for salaried individuals, noting it would offer financial relief to the broader population. However, he pointed out that the lack of an increase in the minimum tax threshold may not sufficiently ease the burden on the most vulnerable and heavily taxed segments. Additionally, the reduction in withholding taxes on property transactions by 1.5% across all tax brackets and the removal of 7% federal excise duty on property transfers are expected to stimulate the real estate and construction sectors. PRAC expressed concerns about the budget's failure to address the pressing economic challenges. The most significant issue raised was the budget's reliance on unrealistic revenue targets and growth projections, which Dagha described as "disconnected from economic realities."
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‘Disconnected from economic realities': think tank says budget could increase unemployment
The budget has failed to address critical challenges, particularly in the industrial sector which could increase unemployment and destabilize Pakistan's already fragile economic outlook, according to the Policy Research and Advisory Council (PRAC). In a statement published on Tuesday, PRAC Chairman Mohammad Younus Dagha acknowledged the budget's forward-thinking initiatives, including the Green Sukuk, which he said signals a positive shift toward sustainability and reflects the government's commitment to environmental concerns. Post-budget presser: Aurangzeb addresses key concerns He lauded the reduction of withholding taxes on property transactions by 1.5% across all tax brackets and the removal of the 7% Federal Excise Duty on property transfers as this is expected to stimulate the real estate and construction sectors. He also welcomed the tax relief for salaried individuals. However, he said the lack of an increase in the minimum tax threshold may not sufficiently ease the burden on the most vulnerable and heavily taxed segments. Moreover, he said the budget is relying on unrealistic revenue targets and growth projections, and is 'disconnected from economic realities.' He emphasized that the ambitious projections ignore prevailing macroeconomic constraints, which could lead to 'unachievable expectations and exacerbate the nation's fiscal challenges.' Budget is 'death knell' for IT industry: P@SHA He added that the budget also raised alarm over the country's fiscal health, particularly with regard to debt servicing, which is projected to consume 50.4% of the current expenditure and 74.1% of net federal revenues in FY26. 'This severely limits the resources available for developmental spending,' it said. It said the Federal Public Sector Development Program's reduction by 29%, from PKR 1,400 billion to PKR 1,000 billion for the upcoming fiscal year, 'will undermine crucial initiatives, slow job creation, and hinder long-term economic growth.' 'By slashing development spending, the government risks undermining long-term economic progress and stability,' said Dagha. 'The reduction in PSDP funding directly contradicts the need for investment in infrastructure, education, and healthcare.' PRAC also expressed concern over the lack of targeted support for the industrial sector, which it said has experienced a 1.5% decline during the first nine months of FY2025. Moreover, it said despite the widening trade deficit in services, the budget has failed to announce special incentives for Pakistan's thriving IT sector, missing an opportunity to leverage its potential for economic growth. Similarly, no export-oriented growth measures were introduced, 'a critical oversight in boosting foreign exchange earnings and strengthening the country's economic stability.' Meanwhile Dagha highlighted the insufficient allocation for Karachi, which now ranks as the fifth least livable city globally. 'With only PKR 3.2 billion allocated for the K-IV water supply project, a vital initiative to address the city's ongoing water crisis, the budget allocation is deemed inadequate,' the statement said, adding that several key projects under the Karachi Transformation Plan, announced in 2020, remain largely unaddressed. 'This was a rare opportunity to implement transformative reforms in critical areas such as education, healthcare, and infrastructure,' said Dagha. 'Regrettably, the budget largely missed the chance to enact meaningful reforms in these vital sectors.' PRAC has urged the government to reconsider the budget and introduce measures that can effectively address the economic realities of Pakistan. 'There is an urgent need for a more balanced approach that focuses on sustainable growth, fiscal responsibility, and targeted support for key sectors such as industry, technology, and social welfare,' it said.
