All eyes on Budget ‘26

As Pakistan inches closer to presenting its budget for FY2026, scheduled for June 2, the stakes have rarely been higher. After years of economic turbulence, there are cautious signs of recovery, and the finance team, led by Finance Minister Muhammad Aurangzeb, exudes a quiet confidence. Early statements suggest that the FY26 budget will be “export-driven” and “strategic” – a familiar refrain in Pakistan’s economic playbook. Yet, it is not the intent but the execution that has consistently failed us. The structural flaws in Pakistan’s economy are well documented. High financing costs, exorbitant energy tariffs and a convoluted tax system have repeatedly been identified as major impediments to growth. These issues have been dissected by some of the best economic minds globally, whether academics, financial analysts or institutions. What Pakistan lacks is not a diagnosis but a cure. If this year’s budget is to mark a turning point, the government must ask itself: what are we doing differently this time?

A strategic budget can only be effective if it is shielded from the political interference that has plagued previous efforts. Time and again, economic programmes have been shelved mid-way or drastically altered simply because they were inherited from a rival political party. Prime Minister Shehbaz Sharif has spoken of a charter of economy, an idea that deserves bipartisan commitment. Without it, the country will remain trapped in a cycle of short-term fixes and long-term instability. The promise of export-led growth has merit, but it cannot materialise without lowering the cost of doing business. This includes bringing down energy tariffs, streamlining regulations and, most importantly, reforming the tax regime. Reports of a 500 per cent surge in tax-related complaints highlight a deeply flawed system. The recent harassment of taxpayers under new collection measures also undermines trust and reverses whatever progress had been made. Tax reform must be consultative, fair and aimed at broadening the base and not squeezing existing taxpayers dry.

Another key area to watch is the rollback of tax exemptions. In theory, such exemptions are designed to support nascent industries. In practice, they have often become a tool for rent-seeking by entrenched interests. Removing these privileges is fiscally responsible and a step towards a more equitable economic model. The government must now ensure that the savings from these withdrawals are redirected to human development and social infrastructure. Indeed, public spending priorities must also be reevaluated. Pakistan’s ranking on the Human Development Index (HDI) – 168 out of 193 – is a national embarrassment. While the HDI score has grown incrementally over the decades, its stagnation in recent years reflects a worrying lack of investment in people. This country will not prosper until education, healthcare and social safety nets are made central to budgetary planning. A budget cannot fix a broken system on its own. But it can set the tone for reform. The FY26 budget must do more than just balance books or appease lenders. It must inspire confidence among investors, businesses and, most crucially, the people of Pakistan. The whole country will be watching.