The 2025–26 budget reports a modest budgetary deduction and climate intention, but remains, at its heart, an act of improvisation rather than a coordinated choreography.
Presented as contractionary, the budget sets ambitious objectives: budget deficit at 3.9% of GDP and a record surplus of 2.4%. However, these figures are based on a low basis. Tax measures remain largely regressive, offering a repair in tokens while paying ordinary citizens.
With increased advantages for parliamentarians and the stagnation of development spending, the budget reflects an elitist inclination. Indirect imposition dominates, while key sectors such as real estate, retail and agriculture remain undertaken.
While the investment climate remains dark: the LSM has decreased 1.52% (10mfy25), and public investment is exhausted by the debt service, pensions, losses and circular debt. Ergo, the economy remains biased towards research and consumption of rent.
Despite the softening of inflation and the improvement of reserves, these short -term gains mask a ruin growth foundation. Pakistan ranks 168th on the UN HDI and the last on the World Genre Gap of the WEF 2025, reflecting deep gender inequalities and chronic under-investment in education, health and well-being.
While budgetary misfortunes dominate the headlines and public discourse, the climatic vulnerabilities of Pakistan are just as alarming. Classified as the most vulnerable in 2022, its cities are constantly confronted: atmospheric pollution, inadequate drainage, the paradox of the deluge and the drought and the effects of the thermal islands.
PER, the last economic survey, the year 2024 was recorded as the ninth hot year in Pakistan in the past 64 years. In addition, Pakistan ranks 178th out of 180 on the global environmental performance index, highlighting serious challenges of air quality, water resources and water resources and
Climate action.
Despite this, the budgetary response remains in conflict. The 2025–26 budget integrates the climate via a climate budget tag (CBT) in more than 5,000 federal cost centers, criticisms argue that it often constitutes a simple change of brand of existing projects, such as hydroelectric dams, as part of a climate label. Attenuation allowances increased by 183%, the adaptation of 83% and spending linked to governance amounted to RS28.3 billion.
However, these gains are undermined by significant cuts, preparation for reduced disasters by 30% and reduced reduced pollution of 66%, suggesting a reactive rather than proactive climate strategy. Meanwhile, the budget of the Ministry of Climate Change was reduced by 3.5 billion rupees to 2.7 billion rupees, and the environmental protection allowance increased by 7.2 billion rupees to 3.1 billion rupees.
Political contradictions further weaken the impact. A carbon tax of 2.5% was imposed to discourage the use of fossil fuels, but without structural reform, it looks like another burden for the poor. Meanwhile, rights to solar panel imports have been increased and hybrid and electric vehicles are now taxed.
The most worrying is the continuous dependence on income for fossil fuels; 81% of so -called “green” income comes from Petroleum levies, a blatant tax paradox where climate financing depends on heavy carbon sources. These mixed signals have rightly aroused criticism such as “absurd contradictions” which undermine clean energy objectives.
The cherry on top? On a global scale, the landscape is not encouraging either. Multilateralism is crumbling. The adjustment mechanism of the EU carbon border (CBAM), American protectionism and the promises of insufficient COPs underline the widening of the abyss between rhetoric and reality.
The COP29 “Baku to Belem” BAKU roadmap at 1.3 t “remains ambitious, with only $ 350 billion promised from the target of $ 1.3 billion, echoing the broken engagement of $ 100 billion per year from the Paris Agreement. For developing countries like Pakistan, the expectation of international funding is both futile and dangerous.
Against this context, it is obvious that it takes two in Tango: tax compensation and climate resilience must synchronize. Treating them as separate political tracks is obsolete. Instead, Pakistan must take advantage of climate funding as a development and tax tool, rethink its budget through an integrated green lens.
Here is how: a well -calibrated carbon tax, from RS1,500 / tonne and phase up to Rs2,500, offers an important opportunity to mobilize the financing of the interior climate, potentially generating up to 1.2% of GDP. Unlike the current fragmented framework, this approach could evolve towards a hybrid taxation and exchange system by 2030, aligned on the emerging regional carbon markets. It balances climate ambition with budgetary pragmatism, allowing level investments in renewable energies and low carbon infrastructure.
Meanwhile, the plastic industry, already contributing to more than $ 861 million per year in taxes, has an avenue for targeted packaging samples. Informed by Kenya regulatory experience, such measures could finance recycling systems and public engagement to reduce urban waste at source.
Energy subsidies, in particular for oil and electricity, which represent 87% of the subsidy budget of Pakistan RS1,037 Billions, require urgent restructuring. With a circular debt in the energy sector now around RS2.4 Billions, a progressive passage of universal grants to targeted support for vulnerable groups can facilitate budgetary pressure while promoting the energy transition. Parallel investments in public green infrastructure, in particular solar energy and wind in poorly served regions, could stimulate green employment and long -term cost savings.
The early success of Pakistan with the Green Sukuk program signals the potential of Islamic finance as a sustainability vehicle. By modernizing financial architecture and pursuing mixed financial strategies, Pakistan can better access the global investment basin of $ 1.8 Billion.
Nature -based solutions also guarantee strategic expansion. Programs such as the Costa Rica payment model for ecosystem services (PES) or the own Tsunami Tree of the Billion Tree of Pakistan could be set up to finance forest conservation and ecotourism.
Case studies of the SWAT Miandam Valley reveal how modest payments can encourage communities while generating environmental value. The rationalization of 50 billion rupees to 80 billion rupees in agricultural subsidies could also reduce environmental degradation while reallocating resources to intelligent climatic practices such as drip irrigation and organic inputs.
With the availability of water per capita now less than 1,000 cubic meters (compared to 5,260 in 1951), pricing mechanisms for large -scale users, in particular in the industrial sector, are essential to encourage efficiency and resilience. It is not a income strategy; It is a national imperative in the face of increased climate and water insecurity, in particular after the IWT abrival.
According to the IMF, 10 low -income countries are in debt, 25 are at high risk and 26 risk moderate risk, leaving only seven with a low risk. This shows how debt has become a paralyzing burden for more than half of the poorest nations in the world. In developing countries such as Pakistan, the increase in debt reduces budgetary space and threatens financial stability. Climate debt exchanges (DFC) offer a potential solution by canceling or refinancing debt in exchange for climate investments.
For example, in 2023, the equator exchanged $ 1.6 billion in debt for a blue obligation of $ 656 million to finance the conservation of the navies.
To make these changes real and lasting, Pakistan must implement a set of relevant actions in a coherent tax and climate strategy.
First of all: the marking of the climate budget must be waterproof, more routine development as a climate action. Catastrophe expenditure must have graduated from the rescue strategy for dressings to resilience. As Dr. Khalid Waleed noted in these pages, all carbon sampling income and a large part of the oil tax should flow directly into the Pakistani climate fund, transforming climate taxes into climatic solutions. Deploy the flagship pilots, solar roofs in poorly served areas, e-buss, flood-leaf boxes, with mergers and social acts to prove magnetized impact and co-financing.
Then, the Dure-Severe climate in federal architecture. Integrate climate-based transfers based on NFC rules to empower provinces and districts with funds and know-how. A fair transition means jobs to the test of future: rebuilding with resilient infrastructure to floods and workers of fossil fuels for green concerts, supported by social protection.
Evolve intelligent climate agriculture, think of drip irrigation, resilient seeds and water harvest to increase yields, reduce losses and cure ecosystems. And yes, win hearts and minds: climate samples need public support, so deploy awareness of mass and green the program.
Finally, climate governance is intelligent and transparent. Create climate budgeting units, activate transverse working groups and connect expenses to integrated financial management dashboards (IFMIS) for real -time monitoring. Green public procurement, weighted for life cycle emissions and the effectiveness of resources, must guide where the rupe is lands.
Build a national carbon register to unlock future income from the carbon market. Keep honest performances with parliamentary journals, citizens’ audits and thinking group monitors. And do not put the touch of the future, offer young people a seat at each table, from the design of policies to the supervision of the project. The credibility of the climate depends on it.
Tango between budgetary stability and climate responsibility cannot be danced with a foot. The Pakistan crisis is double, and must therefore be its solution.
Furqan Ali is a Peshawar -based researcher who works in the financial sector.
Arfa Ijaz is an environmental engineer and researcher working in the energy sector.
Warning: The points of view expressed in this play are the own writers and do not necessarily reflect the editorial policy of PK Press Club.TV.
Originally published in the news
