In the national budget for fiscal year 2025-26, real estate and construction have got some incentives, and key agricultural inputs, including fertilisers and pesticides, have been kept untaxed.

Though appreciable under an ideal situation, pampering these sectors without taking enough care of small industrialists and the urban middle class could widen the divide between the ruling elite — with their alleged financial interest in agriculture, real estate and construction — and the struggling urban population and small industrialists.

The budget presents a paradox: ambitious rhetoric of relief overshadowed by structural constraints. The 10 per cent increase in salaries of government employees and 7pc rise in pensions of retired government employees, plus a reduction in their income tax slabs and a sizable allocation of Rs722 billion for welfare spending under the Benazir Income Support Programme (BISP), are pro-people measures. But if you compare a Rs1 trillion development budget with the Rs8.207tr allocated for debt servicing and Rs2.55tr for the defence sector, you can imagine the severity of structural constraints.

The budget documents show that from the next fiscal year, starting July 1, the government will collect even more on each litre of fuel oil sold in the country under an enhanced petroleum levy target of Rs1.47tr (against this fiscal year’s revised estimate of Rs1.161tr). This is in addition to the carbon levy of Rs2.5 per litre of petroleum, diesel and furnace oil that the government plans to begin collecting from the next fiscal year.

Millions of bike riders across Pakistan, most of them struggling to make both ends meet, will be paying more to fuel their modest means of transport. And hundreds of thousands of digital workers, most of them belonging to the lower and middle classes, would now also be paying taxes on their earnings and on what they purchase online as the government targets collecting Rs64bn in revenue from taxes on digital platforms and courier services.

Overall, rather than increasing direct taxes on high earners, the government has opted to broaden the base through indirect means — a general sales tax on imported solar panels and even on food and confectionary items and an increased petroleum levy and electric surcharges — raising the cost of essential goods and services. This approach historically burdens the same households that the budget claims to uplift, fuelling inflationary spillovers that erode real income gains.

The International Monetary Fund-aligned fiscal consolidation strategy, targeting a 3.9pc budget deficit, is critical for sustaining international support. But it simultaneously constrains the government’s ability to inject stimulus into employment and the real-sector growth.

While the budget references job creation in information technology and small and medium enterprises (SMEs), it offers no measurable action plan in a country where nearly 30pc of the youth remains unemployed. Pakistan needs to create 1.3–1.5 million jobs annually just to keep pace with new entrants into the labour force — a figure that’s gone unaddressed by the current budgetary proposals.

The energy sector further encapsulates this disconnect between policy intent and public need. While the government plans to cut industrial electricity tariffs for export sectors to enhance competitiveness, household relief is conspicuously absent. Pakistan’s regressive energy pricing structure remains intact, where nearly 68pc of domestic consumers spend over 10pc of their monthly income on electricity bills. Capacity payments to idle power producers, a long-standing fiscal drag, remain untouched — suggesting little immediate relief for ordinary consumers.

Slippages in targets of revenue generation and implementation issues have remained hallmarks of Pakistan’s national budgets for decades.

The FY26’s revenue target of Rs14.13tr looks too ambitious (against this year’s revised revenue estimate of Rs11.9tr) particularly amidst political chaos at home and tension also growing in regional geopolitics. What if the revenue target could not be met? (This fiscal year’s revised revenue estimate shows an estimated shortfall of Rs1tr).

The expanded BISP allocation faces administrative and digital disbursement hurdles, especially in rural areas. Meanwhile, the provincial role in delivering agricultural support remains vague, leaving another gap between federal allocations and ground-level action.

Perhaps the most worrying omission is the lack of a comprehensive employment strategy. While buzzwords like “youth”, “SMEs”, and “startups” pepper the budget documents, no roadmap or targets accompany them. This is a glaring gap in a country where over 64pc of the population is under 30, and youth disenchantment is growing. Employment, not just inflation, is the central concern for millions — and remains inadequately addressed.

For ordinary Pakistanis the FY26 budget offers some cautious hope, but not certainty. It may provide breathing room, but it does not dismantle the structures that keep millions on the economic margins. Whether this fiscal blueprint becomes a vehicle for genuine reform or simply another chapter in optimistic accounting will depend entirely on implementation.

In the end, the success of the budget should not be measured by how many billions are allocated or how eloquently the budget speech is delivered. It should be measured by something far more human: Can a factory worker afford better meals for his family? Can a schoolteacher pay her bills without going into debt? Can a farmer send his children to school without compromising their nutrition? These are the real benchmarks. And by these, the FY26 budget, like all before it, will ultimately be judged.

Published in Dawn, The Business and Finance Weekly, June 16th, 2025