Business Recorder
EDITORIAL: Finance Division released the Summary of Consolidated Federal and Provincial Fiscal Operations July-March 2026 – a publication that is not accompanied by an analysis that is unreservedly in favour of the policies of the administration. On the same day, however, the State Bank of Pakistan (SBP) released its half-yearly (July to December) report that maintained that macroeconomic stability strengthened in the first half of the current fiscal year – a claim made repeatedly by the Ministry of Finance; however, the report then pointed out that the Middle East war, which began on 28 February this year, poses serious risks to Pakistan’s macroeconomic outlook triggering concerns over inflation, trade flows and economic growth amidst global uncertainty – an observation that had no bearing on the July-December data. It is relevant to note that one month into the war — March — remittance inflows rose by a dramatic 33.2 percent to 28 billion dollars — a major boost for the balance of payments position — though reports suggest that Pakistani expatriates in the United Arab Emirates (UAE) may face some challenges in renewing their work visas; especially; subsequent to their 3.45 billion dollar loan recall that was cleared last month with Saudi Arabia extending an additional 3 billion-dollar roll-over to Pakistan. However, for a realistic comparison Summary of Consolidated Fiscal Operations July-March 2026 must be compared to the comparable period the year before and this presents some disturbing factors. First, the projected Gross Domestic Product (GDP) last fiscal year was budgeted at 3.6 against 3.04 percent achieved or, in other words, the 114,692 billion rupees was clearly not achieved. In the current year the projection by the SBP is a high of 3.75 percent to 4.75 percent – an optimistic rate, given the repeated lament by the existing industrial base that they are unable to compete internationally due to much higher input costs than regional competitors (including the recent policy rate upgrade to 11.5 percent) and the claim that the number of unit closures is rising – the last figure cited was 150 as per the All Pakistan Textile Mills Association. In other words, the 129,567 billion rupees GDP projection for the current year is unlikely, which would render all macroeconomic indicators as a percentage of GDP invalid. Second, federal government’s current expenditure registered 14,588 million rupees July-March 2025 against 14,267 million rupees in the current year – a decline that was also indicated in the budget documents premised entirely on lower policy rate in the current year. The policy rate in June 2024-25 was a high of 20.5 percent brought down to 11.5 percent by June 2025 and then to 10.5 percent; however, contrary to expectations that the rate would further decline by end December 2025 it was raised to 11.5 percent last month. Be that as it may, the extent of domestic borrowing is continuing to rise unabated. Additionally, the government also borrowed 1.25 trillion rupees to clear the circular debt whose interest payments are, as is the norm, passed onto the consumers. This was secured when the policy rate was 10.5 percent, and it is unclear whether the 100 basis point rise will impact on the energy prices. However, as is the norm, the targets set by the International Monetary Fund (IMF) were achieved through slashing Public Sector Development Programme — 332,996 million rupees were released against the budgeted target of one trillion rupees this year while July-March 2025 witnessed 309,408 million-rupees disbursement. Sales tax remained the major source of revenue for the federal government – 3.1 trillion rupees against 2.8 trillion rupees collected last year in the same period of July-March 2025; however, it is relevant to note that the bulk of direct taxes collected is from the levy of withholding taxes in the sales tax mode whose incidence on the poor is greater than on the rich, which explains why the poverty levels in the country are on the rise. There is no separate column for collections under enforcement measures, which is a source of pride for the incumbent Chairman of FBR, prompting the Prime Minister to suggest that collections under this head be doubled next fiscal year. Ignored is the dirge by the payees about illegal collections that require a long arduous process – first tribunal and then the courts – to get the remedy. And finally, the statistical discrepancy has risen from 205,691 million rupees July-March 2025 to negative 443,554 million rupees in the same period of 2026. This explains why the data is a lot more positive than the feel-bad factor by the general public – taxpayers, non-tax payers, middle income earners and the poor. Copyright Business Recorder, 2026
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