THERE are rare moments in the life of a nation when convention, circumstance and law point in the same direction. The need for change becomes undeniable. The opportunity to act presents itself. The constitutional framework already exists.
Pakistan may be experiencing one right now.
Three years ago, the country was on the verge of an economic crisis. Foreign exchange reserves were collapsing, inflation was soaring, and default was widely discussed. Policymakers were consumed with survival. A single criterion judged each decision: would it help Pakistan get through the next month?
The stability Pakistan enjoys today is neither automatic nor free. It’s hard earned. Businesses and households have borne the burden of adjustment. Taxes on the manufacturing and formal sector have increased. Wage earners faced some of the highest effective tax rates in the country’s history. Public spending was restricted. Development priorities have been postponed. Economic growth has slowed as policymakers prioritized stabilization over expansion.
The IMF provided an anchor for stabilization and a framework for restoring fiscal and external discipline. Many of the measures adopted were painful and controversial, but they helped avoid far more damaging consequences. Today the conversation is different.
Inflation has fallen sharply from its peak. External balances have improved. Foreign exchange reserves have been replenished. Revenues increased and fiscal discipline began to restore credibility. The economy remains fragile and growth remains below potential, but Pakistan is no longer on the precipice.
The road has been difficult, but it has brought Pakistan to something it has not enjoyed for many years: a moment of choice.
Yet stabilization was never meant to be the destination. It aimed to create the fiscal and policy space needed for reform, growth and shared prosperity. This is why FY27 budgets are important. Their importance does not lie in any particular tax measure or distribution of expenditures. This lies in the possibility of moving from stabilization to transformation. The more important question is whether the federal and provincial budgets are working together to improve the lives of 250 million Pakistanis. The federation remains responsible for debt service, defense, pensions and other national obligations. Provinces oversee education, health care, agriculture, municipal services and much of the delivery of public services that citizens benefit from on a daily basis.
Growth requires investment, infrastructure, human capital, functioning cities and effective institutions. Some depend on federal policy, others on provincial execution. Success requires alignment.
For the first time in years, the federal and provincial governments are preparing their budgets from a position of relative stability. The task now is to transform stability into reforms. This requires a new fiscal compact – not necessarily a new constitutional arrangement, but a new shared commitment by federal and provincial governments to broaden the tax base, improve the quality of spending, invest in human capital, strengthen local governments, accelerate digital transformation, and create the conditions for growth and job creation.
But tax reform isn’t just about raising more revenue. It is also about collecting income fairly.
Tax morale depends on fairness and not on an ever-increasing burden on the same taxpayers. Indirect levies such as the oil tax cannot replace real tax reform either. Sustainable revenues require a tax system that is broader, fairer and more pro-growth.
The debate should therefore go beyond the arithmetic of revenue and expenditure. Budgets are not judged by what they allocate, but by what they achieve. Do children learn? Do hospitals provide better outcomes? Are cities becoming more productive? Are companies investing? Are jobs being created?
These are the indicators that matter, because they reveal how far Pakistan still has to go from stabilization to prosperity. A successful federation does more than divide resources; it aligns incentives and accountability, rewards revenue efforts, and links spending to results. These may be technical reforms. In reality, they determine whether Pakistan’s future is shaped by productivity and opportunity or by recurring cycles of crisis and adjustment. For too long, budget debates in Pakistan have focused on managing the shortage. The FY27 budgets offer an opportunity to build prosperity.
For years, Pakistan has been trying to avoid the worst. Exercise 27 offers a chance to seek the best. History rarely announces turning points in advance. They often arrive disguised as budget documents and tax tables. However, behind these figures lies a wider choice.
Pakistan can look at FY27 as another budget cycle. Or he can take advantage of this moment to make the bold decisions that reform requires. The question is whether we dare to take it.
The author is a former advisor to the Ministry of Finance. He tweets @KhaqanNajeeb and can be contacted at: [email protected]
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the editorial policies of PK Press Club.tv.
Originally published in The News
