• Says centralisation at one level may prove more effective if provinces don’t empower local governments
• Setting targets alone isn’t sufficient without practical measures and continuous monitoring, opines Dr Ishrat Husain

KARACHI: Former federal finance minister Dr Miftah Ismail has questioned the usefulness of the National Finance Commission (NFC) award in a country like Pakistan, where provinces fail to transfer financial resources to local governments.

He said that the Provincial Finance Commissions (PFCs) were not functioning effectively and “if provinces do not devolve resources and powers to local governments, then centralisation at one level may prove more effective than monopolies at four different levels”.

He said this while speaking at a seminar titled ‘Budget Insight 2026–27’, which was organised by the Applied Economics Research Centre (AERC) at Karachi University (KU) on Monday.

Dr Ismail also described taxes on petroleum products in Pakistan as highly regressive and disproportionately burdening low-income groups and said that around 50 per cent to 60pc of petrol in the country is consumed by motorcyclists, who are paying nearly Rs100 per litre in various taxes and levies.

Expressing concern over the country’s poor progress across sectors, the former minister noted that India and Bangladesh had surpassed Pakistan in several economic and social indicators and Pakistanis had become poorer over the past four years, with real incomes consistently declining.

“Our literacy rates, which had been improving before 2010, have since deteriorated. In Sindh, nearly 60 per cent of fifth-grade students cannot fluently read even second-grade textbooks, reflecting a serious educational crisis,” he said.

The country, he pointed out, had also failed to make notable progress in health, nutrition, and human development. Malnutrition among children, he said, remained alarming in Pakistan, which currently has the highest number of hepatitis patients in the world.

He identified expensive electricity as the biggest obstacle to exports, while observing that unless electricity tariffs were reduced to levels comparable with those in India, Bangladesh, and other regional countries, exports couldn’t grow substantially.

He contrasted Pakistan’s current exports of about $30 billion with Vietnam’s $400bn, noting that both countries had similar export levels in 1990.

Seasoned economist and former State Bank of Pakistan governor Dr Ishrat Husain emphasised that the budget was not merely an account of income and expenditure but part of a comprehensive medium-term framework.

“Unfortunately, Pakistan’s budgeting process has not been effectively linked to national policies, resulting in poor outcomes. Unless goals in agriculture, industry, education, and health are aligned with the financial resources required, the gap between policy and implementation will persist,” he told the audience.

He cited the 2010-11 NFC award, which set a target of raising the tax-to-GDP ratio to 15pc within five years. He added that 15 years later, it remained around 11pc, showing that setting targets alone wasn’t sufficient without practical measures and continuous monitoring.

Dr Husain highlighted the absence of an institutional mechanism to review budget allocations, goals and outcomes after approval.

He urged activation of the National Economic Council (NEC), a constitutional body chaired by the Prime Minister and comprising provincial chief ministers and the federal economic team.

He also criticised the weak linkage between education policy and science, research and IT, which has led to alarming unemployment among university graduates.

“Pakistan’s bureaucratic system, still operating on colonial-era methods, causes delays, while other countries use e-governance and e-filing for real-time decisions,” he said and called for digitising the entire government system to reduce inefficiency and delays in development projects costing billions of dollars.

He also stressed prioritising education in the budget, despite “resistance from groups whose privileges may be affected”, as education is the true foundation of sustainable development.

Concluding, Dr Husain suggested quarterly financial meetings, digital tracking of development goals, and timely corrective decisions.

Later, Dr Muhammad Sabir of the Social Policy and Development Centre presented a detailed analysis of the 2026-27 budget.

In his remarks, KU Vice Chancellor Dr Khalid Mahmood Iraqi identified the country’s rapid population growth as a key challenge. He criticised the NFC Award for distributing resources largely based on population, which indirectly encouraged population growth.

“Unlike developed countries that control population to achieve economic and social progress, Pakistan’s unchecked growth is obstructing national development,” he said, regretting that education and health sectors that helped nations grow had never been a priority of successive Pakistani governments.

AERC Director Prof Nooreen Mujahid, Dean of Arts and Social Sciences Prof Samina Saeed and Dr Amir Hussain of AERC also spoke.

Published in Dawn, June 30th, 2026