A budget to forget

STATE budgets mustn’t mirror boring finance ledgers that merely balance revenues and outlays. They must embody strong strategy scripts that show vividly how the state will drive progress. But reading ours is painful as one goes through over 100 unrelated petty measures that don’t add up to a gripping vision for progress. Clearly, progress isn’t a goal to pursue for our elite hybrid rulers but a prospect to fear, as it harms their dubious wealth and power. So, the new status quo federal budget makes the rich richer, the poor poorer, and the IMF and big lobbies happier. It defers yet again the state reforms and societal restructuring we urgently need to thrive. Our rulers dread them and so fail on most key aims of good budgets.

The document meets the fiscal balance aim with a deficit target of 3.6 per cent of GDP (against 7-8pc till recently) but via heist and spin. It expropriates surpluses from meek provinces to force them to cut spending by nearly 20pc, mainly uplift funds. This effectively cuts their NFC share from 57.5pc to 46pc and the share in total federal funds to only 34pc if we add federal non-tax funds, which are raised mostly in provinces. This covert heist, despite the 4pc cut in debt outlays from last year because of large interest rate cuts, was due to a fall in State Bank profits too, a rise in defence outlays after the 2025 war with India, tax relief, and the aim to avoid new taxes.

Some had hopes that growing Saudi defence ties would help with rising defence outlays. Rulers could also raise taxes on undertaxed sectors and cut waste, subsidies and state units’ losses, instead. As these steps hurt the elites, those in power cut uplift funds at all levels. Had these funds been used well there could have been less poverty and more progress. The total revenue aim is part spin as we usually miss it. So, we may have a mini-budget taxing mainly the masses or more cuts in uplift funds. There is no real increase in the revenue aim from last year over inflation, and so the tax-to-GDP ratio remains near 11pc, which is low even regionally. So, the budget fails on the fiscal expansion and devolution aims.

On the fiscal equity aim, the ratio of direct and indirect (that harm the poor most) taxes is 49:51pc against 37:63pc just three years ago. But tax progressivity rose much less because new direct taxes fell on already overtaxed sectors and persons and not undertaxed retail and other sectors. The former now get tax relief but by cutting uplift outlays. Experts think the new retail tax scheme may fail like many past ones, given missing political will. Indirect taxes and the petroleum levy, which is an indirect tax too, still rose by Rs3 trillion in three years. So, their burden on the poor keeps rising.

Clearly, progress isn’t a goal to pursue for our rulers.

To drive economic progress, industrial and export sectors will receive — besides the ongoing interest rate cuts — tariff cuts on raw materials, tax relief and SME facilitation measures. But some of them yielded few gains earlier while even new measures may fail if the rollout remains weak. Industrial policy measures — such as special zones and directed credit, industrial upgrading funds and R&D support — that had helped the Asian Tigers the most are missing. Support for agriculture, despite its many problems, and IT, despite its huge potential, is weak. So, jobs and export revenue increases remain uncertain.

On the social progress goal, health and education spending ratios to GDP remain flat from last year and much lower than those of most Asian peers. The BISP budget rises in real terms but may not dent rising poverty that now affects over 40pc of the people under the new World Bank count. Raising poverty outlays a bit when structural drivers are rising due to state policies is like throwing a band-aid at a growing, self-inflicted wound. Climate change is a huge threat for the poor but a minor priority in the budget, with no new programmes.

Finally, the document lists many measures for budget efficiency and transparency in tax collection. But many of them have had limited success previously, while new measures may fail due to weak rollout. Oddly, there is no attempt to improve the expenditure side across the four main heads: debt, defence, development and delivery.

So, the budget maintains the status quo while giving the illusion of reform and fails on almost all aims. It’s a budget to forget in terms of its banal details but not a budget to forgive for its overall lack of ambition, elite bias and assault on provincial autonomy.

The writer holds a PhD in political economy from the University of California, Berkeley, and has 25 years of grassroots to senior-level experience across 50 countries.

murtazaniaz@yahoo.com

X: @NiazMurtaza2

Published in Dawn, June 23rd, 2026 ...