A fairy-tale budget

Over the last three decades at least, the people of Pakistan have had little to cheer about the budget. This year, however, Budget 2025-26 has left them – including industrialists, business elite and professionals – stunned.

The only fig leaf on the budget is the modest rise in government and military salaries and pensions and a patchwork of tax reliefs, all of which will erode away with inflation. And inflation will rise in the coming months.

All budgets are expected to be drawn up considering the context of the prevailing economic conditions. Contrarily, this year’s budget has clearly been put together in a vacuum. The economy has been on a ventilator for some years now – and the cost is painfully visible in terms of rising unemployment and poverty of the poor and the middle class; of youth exodus out of the country, even by endangering their life; and of the creeping exit of businesses and industries from the economy. This year’s budget will squeeze a little more life out of the unfortunate economy.

A scan of the economy, as presented by the government’s own Economic Survey, presents a disheartening scenario. Agriculture and industry are the pillars of any economy. Over FY2024 and 2025, crop sector growth was negative 7.0 per cent; with important crops – wheat, rice, sugarcane and cotton – declining by 14 per cent. The only redeeming feature is livestock growth at 5.0 per cent – though that is a number not based on annual data collection, but is ‘estimated’. And, since the year 2000, livestock growth has been routinely manipulated to inflate the overall agricultural growth rate.

There appears to be a deeper crisis. Yields – production per acre – have – declined for three of the four major crops: wheat, sugarcane and cotton. Pakistan is essentially a cotton-textile economy, and the 16 per cent decline in area sown, 19 per cent decline in yields, and 32 per cent decline in output should have sent shock waves through the policymaking corridors. Budget 2025-26-plus has provided little to remedy the situation.

The other pillar is manufacturing. Herewith, large-scale manufacturing has grown by a mere 1.5 per cent, but small-scale manufacturing has reported a robust 9.0 per cent growth. Here again, small-scale manufacturing data is not available on an annual or regular basis, the last small-scale establishment census being a decade-plus old. Accordingly, the sectoral growth is ‘estimated’ – to manipulate the overall manufacturing growth rate. Pakistan’s industry, choked by record-high taxation, is gasping for breath and Budget 2025-26 has provided little for its revival.

Except for electricity and gas distribution growth at 29 per cent, which is a statistical outcome, the highest growth is recorded for General Government – civil and military – at 10 per cent. It appears that ‘government’ is prospering at the cost of the economy, which is withering away. Not surprisingly, the ‘government’ is not even able to generate the resources out of the ailing economy to support its own payroll, which is now increasingly financed out of internal as well as external loans.

Tax collection over FY2024-2025 reflects the decline of the economy. Direct tax collection declined by 8.0 per cent, and indirect tax collection – customs duty, GST and FED – by a whopping 19 per cent. In other words, tax collection has been 80 per cent of what was budgeted in 2023. In this background, the 20 per cent growth in all tax heads appears to be herculean.

The budget is pointedly pro-powerful lobbies and anti-poor. The IMF has long identified the real-estate sector for its virtual tax-free status and demanded remedial actions. Instead, the budget actually does the reverse and grants incentives to the sector. The power of the rich and powerful to steer government policies and public resources to benefit themselves at the cost of the national economy is now all too blatant.

At the other end, for example, the price differential on gasoline purchases via card or cash means that the very poor who operate rickshaws, chingchis and taxis and who do not have a bank account (nor do banks welcome them), will be particularly adversely affected while filling up their vehicles. The craving for more revenues appears to have blinded the budget-makers, unconsciously or consciously, to the impact of their decisions.

Another case of ignoring the plight of wage-earning classes is the argument that no raise in minimum wages is being proposed, unlike pay rises for government employees, because employers are not willing to pay even the current minimum wage – implying, thereby, that the government is incapable of enforcing the law or finds it expedient to look the other way. Such barefaced acknowledgement of the absence of the writ of the state or unwillingness to enforce it is a first.

The writer represented Sindh on the 7th NFC and now represents Balochistan. 

He tweets/posts @kaiserbengali