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Business Recorder
7 days ago
- Business
- Business Recorder
Pakistan's vision amidst FY26 Budget
Pakistan's annual budget has traditionally been more of a routine fiscal exercise conducted every year, covering only one year, voted every year, and executed over one year, rather than a fully strategic, long-term development plan focused on sustained growth in economic and social sectors with focus on poverty reduction and being independent of IMF crutches. There were days when the Planning Commission of Pakistan was a mighty supervisory body preparing a well-researched five-year 'Development Plan with Vision' on government's commitment to education, health, infrastructure, job creation and above all poverty reduction. The annual budget in those times consistently aligned itself with the country's vision and government's commitment to public well-being. In recent times, however, the annual budget rarely aligns itself with those strategic visions. Investment in education, health, poverty reduction, infrastructure, and job creation falls short, especially under IMF-mandated austerity. The budget 2025-26 is no different from the past routine except that the incumbent Finance Minister, Muhammad Aurangzeb, in his second Budget presentation, has brought around professionalism and discipline in the otherwise chaotic fiscal and economic dynamics of the country. With political expediency, along with persistent IMF dictates, ruling the roost, this is the best the Finance Minister could have achieved. To expect something profound coming out the budget demands drastic actions on ground like cuts in government expenditure starting from the self-fixed and out of proportion financial privileges of our legislators and state functionaries, bringing the untaxed sectors like agriculture into the tax net, arresting the losses emerging out of loss-making public sector enterprises, radical reforms to achieve growth in the agricultural and industrial sector of the country. The political hierarchy is not ready for it - although all of it is doable for the good of the country and its people. The announced budget and IMF-driven conditions appear effective in restoring macroeconomic stability. However, they fall short in translating fiscal discipline into meaningful growth, poverty reduction, and sustainable economic transformation. Without deeper structural reforms, especially in growth, taxation, infrastructure, agriculture, and industrial policy these weaknesses may persist for a long time to come. Critics have widely spoken and written on taxation and tariffs' imbalances. These cosmetic taxation trade-offs benefiting one segment and depriving the other will not change the destiny of the people of the country. There are far bigger and serious issues which challenge the fiscal, economic and social sovereignty of the country. The budget, understandably, is silent on how to address them — as there are no ready answers for it. The budget has come up with a very ambitious GDP growth target of 4.2 percent growth — without presenting the mechanism to achieve it. This target seems detached from reality — the country's economy is likely to grow 2.7 percent in the fiscal year ending June 2025. The IMF expects GDP to grow by 2.6pc in FY25 and for the economy to grow 3.6 percent in FY26. With fiscal austerity over-riding stimulus, a 7 percent reduction in overall spending and cuts in capital outlay, the budget emphasises deficit reduction rather than growth-driving investments. Despite tax incentives, there is no coherent strategy to revive agriculture and large-scale manufacturing—sectors vital for employment and exports. Foreign Direct Investment (FDI) is the prime-mover of growth. The government had channeled funds into the Board of Investment (BOI) and Special Investment Facilitation Council (SIFC), but these efforts lacked a robust policy foundation. Despite modest FDI gains, analysts believe they are 'short-term, ad-hoc measures' with 'no significant increases' in investment volume. Even with tariff rationalisation, non-tariff barriers, red tape, and weak infrastructure remain major disincentives for FDI. Poverty alleviation remains a serious challenge for the country. The IMF-mandated austerity measures have led to cuts in public sector development programmes, risking deeper joblessness and poverty cycles. While the Benazir Income Support Programme (BISP) saw a 20 percent funding boost to Rs 7.16 billion, this remains limited in addressing deep-rooted poverty. Nearly 45 percent of the population still lives below the poverty line, with extreme poverty at 16.5 percent. Low or negative growth in agriculture, industry, and services, combined with 2 percent population growth, means stagnant real wages, pushing an estimated 1.9?million people into poverty. There are perpetual tax system inefficiencies. Only ~1.3 percent of Pakistanis pay income tax and the tax-to-GDP ratio remains just ~10 percent. Reliance on withholding taxes is regressive, disproportionately burdening the poor and limiting redistributive potential. The debt servicing pressures remains a threat to country's sovereignty. High interest payments and fiscal guarantees to state-owned enterprises continue to constrain fiscal flexibility and reduce room for investment in growth sectors. The foremost challenges are political instability, weak institutional capacity and debt burden, where interest payments consume a large share of the budget (~50 percent+), crowding out development needs. In times to come Pakistan's annual budget is likely to be a short-term, reactive document rather than a long-term strategic tool for development. It shall remain heavily influenced by IMF programmes, with limited fiscal space and political will to prioritize inclusive growth and poverty reduction independently. If Pakistan is to transition toward a strategic budgeting model, it would need fiscal discipline beyond IMF pressure, reforms in tax collection and expenditure management, stronger institutions for long-term planning and above all political consensus and will to deliver on development priorities. Copyright Business Recorder, 2025
Business Recorder
13-06-2025
- Business
- Business Recorder
Budget: LCCI urges govt to address concerns ahead of NA debate
LAHORE: The Lahore Chamber of Commerce and Industry (LCCI) has urged the government to ensure immediate consultations with the business community to address concerns before the National Assembly finalizes the Federal Budget 2025-26 where it would be presented for debate. LCCI President Mian Abuzar Shad, Senior Vice President Engineer Khalid Usman and Vice President Shahid Nazir Chaudhry in a statement called for urgent revisions. They said the government had projected GDP growth at 4.2 percent, up from the current 2.7 percent. They said the budget overlooks systemic flaws. 'The growth estimates ignore ground realities, high cost of doing business, energy shortages and inconsistent policies which are affecting industrial output. The government must revisit these projections to avoid fiscal shortfalls later.' The LCCI office-bearers said the debt servicing still consumed a significant portion of the budget. Mian Abuzar Shad said that IMF-mandated subsidy cuts which would hurt low-income groups. They added that the imposition of an 18 percent sales tax on imported solar panels has also drawn sharp criticism. They said that this move contradicts Pakistan's renewable energy goals, adding 'instead of taxing solar imports, the government should incentivize local manufacturing and R&D to reduce dependence on foreign products.' Mian Abuzar Shad said that below the mark allocations would affect health, education and infrastructure. They said that slashing social sector funding for short-term fiscal adjustments will harm long-term growth. The government must rebalance allocations to prioritize human development. The LCCI office-bearers said the business community was not satisfied on taxation measures at all and there was a dire need of revisiting these with the consultation of stakeholders. They said the growth and tax targets should be revised realistically, focusing on expanding the tax net rather than overburdening existing taxpayers. They demanded of the government to prioritize the construction of new water reservoirs and the modernization of existing infrastructure to address Pakistan's worsening water crisis. With agriculture contributing nearly 24 percent of GDP and employing over 37 percent of the labour force sustainable water management is essential for economic stability. They said the work on Diamer-Bhasha Dam and other pending projects must be fast-tracked to enhance water storage capacity. They also suggested that the Public-private partnerships (PPP) should be encouraged to secure funding and expertise. LCCI President Mian Abuzar Shad said the funds should be allocated for rainwater harvesting in arid zones to reduce reliance on groundwater, adding the industries should be incentivize to adopt water recycling plants. LCCI President warned that without urgent action, Pakistan could face severe water shortages by 2030, crippling agriculture and industry. He said 'we need immediate investments in reservoirs, or our economy will suffer irreversible damage.' The LCCI office-bearers said the funds for health and education should be increased to ensure sustainable development. They said the government should formulate a clear solar policy with consistent subsidies, net-metering rules, and support for local manufacturing. The LCCI President urged the government to engage in immediate dialogue with stakeholders to address those concerns. He said the budget in its current form would risk stifling economic recovery. 'We hope the government will act on our recommendations before it's too late,' he added. He said that as the National Assembly prepares to debate the budget, policymakers must incorporate feedback from the business community to ensure a balanced and growth-oriented fiscal plan. Meanwhile, Sardar Usman Ghani, Central Chairman of Pakistan Hardware Merchants Association, while rejecting the decision to impose 18 percent tax on imported solar panels in the current budget, has warned that the move would cause irreparable damage to the process of generating cheap and clean electricity. He said it was incomprehensible that the Minister of Finance had given that explanation to protect the local solar panel manufacturing industry, firstly the solar panel industry was almost non-existent in Pakistan and secondly, that move would significantly increase the prices of solar panels. The protection to industry at the cost of public is not a step towards right direction. Public representatives in the government and opposition parties do not allow it to be approved in the budget. Copyright Business Recorder, 2025
Express Tribune
13-06-2025
- Business
- Express Tribune
Traders seek urgent consultation
Listen to article The Lahore Chamber of Commerce and Industry (LCCI) has urged the government to ensure immediate consultations with the business community to address their concerns before the National Assembly finalises the federal budget for 2025-26. LCCI President Mian Abuzar Shad, Senior Vice President Engineer Khalid Usman and Vice President Shahid Nazir Chaudhry in a statement called for urgent revisions. They said that the government has projected GDP growth at 4.2%, up from the current 2.7%, adding that the budget overlooks systemic flaws. The growth estimates ignore ground realities, high cost of doing business, energy shortages and inconsistent policies which are affecting industrial output. "The government must revisit these projections to avoid fiscal shortfalls later." The LCCI office-bearers said that debt servicing still consumes a significant portion of the budget and the IMF-mandated subsidy cuts will hurt low-income groups. The imposition of 18% sales tax on imported solar panels has also drawn sharp criticism. They said that this move contradicts Pakistan's renewable energy goals. Instead of taxing solar imports, the government should incentivise local manufacturing and R&D activity to reduce dependence on foreign products. Mian Abuzar Shad said that below-the-mark allocations would affect healthcare, education and infrastructure. Apart from that, slashing social sector funding for short-term fiscal adjustments will harm long-term growth. "The government must rebalance allocations to prioritise human development."
Time of India
11-06-2025
- Business
- Time of India
Pakistan's Budget After Op Sindoor Prioritises Defence Over Development Amid Soaring Debt, IMF Watch
Pakistan has unveiled a PKR 17.573 trillion ($62B) budget for FY26, sharply increasing defence spending by 20% despite a crippling PKR 76,000 billion ($270B) debt and economic instability. Prime Minister Shehbaz Sharif's government slashed overall expenditure by 7% but allocated over $11.67 billion to the military, excluding pensions. This move follows last month's military tensions with India over the Pahalgam terror attack. While Pakistan projects 4.2% growth next year, the actual growth for this year stands at just 2.7% — well below the South Asian average. Finance Minister Muhammad Aurangzeb claims the budget aims to reset the economy's DNA, boost exports, and stabilize reserves. However, economists remain sceptical, warning that IMF-mandated reforms and structural weaknesses continue to weigh down recovery efforts. Is Pakistan choosing military might over economic revival? Watch the full analysis.#pakistan #pakistanbudget2025 #pakistandebtcrisis #defencespending #imfpakistan #pahalgamattack #militaryoverdevelopment #shehbazsharif #pakistaneconomy #aurangzebbudget #indiarelations #toi #toibharat #bharat #breakingnews #indianews Read More
Kuwait Times
10-06-2025
- Business
- Kuwait Times
Pakistan boosts defense budget by 20%; slashes overall spending
KARACHI: Laborers unload sacks of pulses from a truck at a market in Karachi on June 10, 2025. Pakistan unveiled the federal budget for fiscal year 2025–26 in the Parliament House at the country capital Islamabad on June 10. - AFP ISLAMABAD: Pakistan will raise defense spending by a steep 20 percent after a deadly conflict with its old enemy India last month, but will slash overall federal expenditure for fiscal 2025-26 by a hefty 7 percent to 17.57 trillion rupees ($62 billion). The budget presented on Tuesday by Prime Minister Shehbaz Sharif's government allocated 2.55 trillion rupees ($9 billion) to defense in July-June 2025-26, up from 2.12 trillion. It projected a deficit of 3.9 percent of GDP against the 5.9 percent targeted for 2024-25. Inflation was projected at 7.5 percent and growth at 4.2 percent. The South Asian nation wants to kickstart growth while boosting its defenses after the worst fighting with its neighbor in nearly three decades - which it has cast as a victory - and meeting the strictures of an International Monetary Fund finance program. 'After defeating India in a conventional war, now we have to surpass it in the economic field,' Sharif said in a statement. Pakistan must also contend with the uncertainty of new import tariffs being imposed by the United States, its biggest export market. The clash with India was sparked in April by Islamists who killed 26 men in an attack on Hindu tourists in Indian Kashmir. Islamabad denied New Delhi's allegation that the militants were backed by Pakistan. Four days of fighting featured jets, missiles, drones and artillery. Boost military spending Pakistan's allocation of 2.12 trillion rupees ($7.45 billion) for defence in 2024-25 included $2 billion for equipment and other assets, and excluded a further 563 billion rupees for military pensions. India's defense spending in its 2025–26 (April-March) fiscal year was set at $78.7 billion, up 9.5 percent, including pensions and $21 billion earmarked for equipment. It has indicated that it too will boost defense spending further. Sharif's government has projected 4.2 percent economic growth in 2025-26, saying it has steadied the economy, which looked at risk of defaulting on its debts as recently as 2023. Growth this fiscal year is likely to be 2.7 percent, against the budgeted target of 3.6 percent. Pakistan's growth lags far behind the region. In 2024, South Asian countries grew by an average of 5.8 percent and the Asian Development Bankexpects 6.0 percent in 2025. Finance Minister Muhammad Aurangzeb said the government intended to complete the privatisation of Pakistan International Airlines, a request of the IMF. Growth should be aided by a sharp drop in the cost of borrowing, the government says, after a succession of interest rate cuts. But economists warn that monetary policy alone may not be enough, with fiscal constraints and IMF-mandated reforms still weighing on investment. Aurangzeb said on Monday that he wanted to avoid the boom and bust cycles of the past. 'The macroeconomic stability that we have achieved - we want to absolutely stay the course,' he said. 'This time around, we are very, very clear that we do not want to squander the opportunity.'- Reuters
