Mushtaq Khan
Founder, doctored papers
We can characterise the FY26 budget as well-intentioned fiscal austerity, but overall, it does little to expand the tax base and isn’t very plausible (4.2 per cent GDP growth with full austerity is an extreme goal). It imposes fiscal responsibility on the provinces and targets a consolidated fiscal deficit of 3.9pc of GDP, which is more ambitious than even the International Monetary Fund.
While there is some relief for the salaried class, enhanced general sales tax and fuel levies will further squeeze purchasing power, which means FY26 could see more Pakistanis fall below the poverty line. Not surprisingly, therefore, the budget has been poorly received by analysts, who have characterised it as elitist and insensitive. However, we disagree that the budget is regressive as it penalises digital platforms. This policy aims to deter low-cost Chinese retail imports, which have the potential to severely damage a wide range of local manufacturing. The growing popularity of AliExpress and Temu cannot be denied.
We understand the anger that no tangible effort has been made to increase the tax base. Tajir Dost failed spectacularly, and agricultural income tax was only mentioned in passing. In our view, these failed policies to encourage people to enter the tax net have been taken to the next stage: isolating non-filers by disallowing them from real estate transactions, financial investments, buying/selling cars, and operating bank accounts. This policy must deliver.
DR ISHRAT HUSAIN
Former governor, State Bank
The budget conforms to the agreements reached with the IMF aimed at continued fiscal consolidation, reducing external account imbalance and moving towards climate resilience. The adherence to structural benchmarks, tax relief to the salaried class, containment of the debt-to-GDP ratio, enforcement measures by the Federal Board of Revenue and simplification of tax forms, levy on fossil fuel vehicles and encouraging electric vehicles, and promoting information technology exports meet the expectations.
However, except for the five-year tariff rationalisation programme there is not much to stimulate productivity gains in real sectors, like agriculture and industry, to expand exports and efficient import substitution. On the other hand, the Export Facilitation Scheme, a commendable tool, has been distorted by imposing 18 per cent general sales tax on imported inputs, eroding the flexibility in the choices available to value-added textiles in procuring quality products and thus improving competitiveness.
The real estate sector has been given substantial relief that may divert investment from productive sectors to speculative activities. The efforts to bring traders into the tax net, incentivising digital payments and thus documenting the economy, seem to be lacklustre. I was hoping that the finance minister would outline a roadmap for the transition from the stabilisation towards an inclusive, sustained growth path to assure investors. The recent attack by Israel on Iran has made the external environment more difficult and dangerous.
Published in Dawn, The Business and Finance Weekly, June 16th, 2025
