Budgeting for survival

In the theatre of nations, budgets are more than numbers; they are constitutional manifestos. They reveal how a state sees its people, how it prioritises its future, and what kind of economic civilisation it aspires to build.

On June 10, Pakistan's Finance Minister Muhammad Aurangzeb rose before parliament and unveiled Budget 2025–26 to a nation suffocating under fiscal fatigue, economic dependency and structural decay.

The budget was marketed as reform: promises of digitalisation, green finance and industrial revival. It is painfully clear: this budget is not a recovery but a performance — and beneath the surface lies a catastrophic truth: Pakistan is not budgeting for the future, it is budgeting for survival in a system designed to fail.

The government's most paraded claim was that inflation has been "reduced" to 4.7% from 29.2% two years ago. But this is not a triumph of policy; it is the arithmetic of ruin. In Pakistan, inflation does not subside because of macroeconomic instability. It collapses when economic activity collapses. When fuel prices become unaffordable, when real incomes die, when people stop buying food, transport, and electricity, prices deflate, but so does life itself.

The government may trumpet a 3.6% projected GDP growth, but this is not growth rooted in productivity, exports or capital formation. It is statistical elasticity, a shallow rebound from a multi-year nosedive, propped up by remittance inflows and import compression.

Consider the budget’s much-hyped primary surplus, 2.4% of GDP, and the reduction of the debt-to-GDP ratio from 74% to 70%. Superficially, these signal fiscal discipline. But beneath them lies the grave: development expenditure is being slashed in real terms; the tax burden is being shifted onto the digital economy, salaried middle class, and even pensioners; and the country is entering its twelfth IMF programme with no structural reform in sight.

The numbers work, but the nation does not. The economy is being starved to produce donor-friendly optics, while the internal productive engine remains unbuilt and therein lies the central lie of Budget 2025–26: it pretends Pakistan has an economy that can be managed. It assumes a state that earns, spends, exports, and grows. In truth, none of that exists.

Pakistan has no fiscal autonomy, no export core, no industrial clusters, no technology pipeline and no investment doctrine. What we call an economy is the external management of a hollow republic, funded by remittances from labour we export, by debt and by aid we barter for geopolitical loyalty.

Take the carbon levy. Rs2.5 per litre on petrol and diesel, rising to Rs5 next year, is justified in the name of climate resilience. But this is not a green policy; it is fiscal extraction. Pakistan's emissions are negligible in global terms, and its renewables sector remains underfunded and bureaucratically throttled.

Yet the government seeks green financing of $40 billion from the World Bank and IFC over the next decade, without a domestic framework for carbon pricing, sectoral decarbonisation or energy transition justice.

The budget wants to tax the poor in the name of sustainability while feeding donor appetites for ESG language. This is green theatre. Or consider the digital tax. An 18% sales tax on digital goods and services sounds modern, but it is a death knell for the only surviving frontier of Pakistani innovation. While the world subsidises its digital infrastructure and ICT exports, Pakistan chooses to tax its freelancers, app developers and e-commerce startups into retreat.

At a time when we should be constructing digital special economic zones, investing in cloud infrastructure and integrating fintech with state services, we are penalising digital growth to pad a tax base that has no imagination. This is regulatory cannibalism, not reform.

Even the budget’s so-called industrial push – privatisation of DISCOs, increased allocations for dams and Rs1 trillion in PSDP spending – is a mirage. Privatisation without governance reform only replaces public inefficiency with private monopolies.

Hydropower development remains hostage to land acquisition delays, legal battles and elite capture, and PSDP allocations, year after year, are underutilised, misappropriated or left unspent due to bureaucratic paralysis and interprovincial turf wars. This investment will remain cosmetic without structural correction in procurement law, project auditing and inter-agency accountability.

But the cost of this economic illusion is generational. 64% of Pakistan's population is under the age of 30, yet Budget 2025–26 offers them no promise of mobility, no ladder to climb, no doctrine of economic dignity.

Perhaps the greatest moral and constitutional failure of Budget 2025–26 is its silence on one damning fact: Pakistan still lacks an internal economic engine. It has failed to articulate any doctrine of economic sovereignty. There is no national industrial policy, no tax justice roadmap, no capital markets reform, no labour dignity vision, and no decentralisation plan.

Provinces continue to receive NFC transfers untethered from productivity or industrial output. The real estate sector remains untaxed and parasitic. Agricultural loans are given, but land reform is untouchable. More than a policy document, the budget is a ledger of cowardice.

What, then, must be done? First, Pakistan needs a New Economic Constitution, a binding, justiciable framework that transforms budgets from yearly announcements to long-term, rights-based economic plans. This constitution must enshrine five non-negotiables: industrial sovereignty, capital reinvestment, labour protection, provincial fiscal autonomy and digital nationhood. Each budget must be judged against these anchors, not IMF reviews or fiscal deficits.

Second, the government must immediately identify five national economic clusters to scale, such as agro-processing, textile value chains, renewable energy, software engineering and minerals refinement. These must be embedded into legally protected industrial corridors governed by local development boards with sovereign funding channels. Without this, every PSDP allocation will be another episode of misdirected hope.

Third, Pakistan must democratise capital. The State Bank must be restructured not as a monolithic inflation hawk, but as a dual-mandate institution that manages both monetary stability and employment generation. A Sovereign Investment Fund must be created to deploy capital, raised through diaspora bonds, Islamic instruments, and pension pooling, into national growth engines. Debt used for consumption must end. Debt used for reinvention must begin.

Fourth, tax reform must become moral reform. Real estate gains must be taxed. Agricultural income must be brought into the net with differentiated slabs. All FBR revenue must be geotagged and its spending linked to human development indicators. A tax paid must translate into a school, a road, or a clinic, else it is not a tax. It is theft.

Fifth, the budget must be federalised. Provinces must be given constitutional authority to issue development bonds, design their own tax regimes within federal parameters, and administer industrial training linked to local growth strategies.

Centralisation is Pakistan's economic cancer. Decentralisation is its only cure. This budget is not a turning point. It is a missed opportunity. A document that codifies mediocrity while performing the aesthetics of reform. The tragedy is not that the numbers are wrong, but that the vision is missing. A vision that sees Pakistan as a sovereign republic to be built. Pakistan does not need another budget. It needs a beginning.

The writer is the director of the Centre for Law, Justice & Policy (CLJP) at Denning Law School. He holds an LLM in Negotiation and Dispute Resolution from Washington University.

Disclaimer: The viewpoints expressed in this piece are the writer's own and don't necessarily reflect Geo.tv's editorial policy.

Originally published in The News