Photo : Tanveer Shahzad/Dawn
Photo : Tanveer Shahzad/Dawn
In Focus
Pakistan's fiscal tightrope: IMF Demands, Tax Enforcement, and Economic Challenges
On 11 June, the Finance Minister of Pakistan, Muhammad Aurangzeb gave a stern warning, stating that unless the parliament passes strict tax collection measures, which have already been committed to the International Monetary Fund (IMF), the government would have to raise an extra PKR 400-500 billion through taxes. These measures would give the Federal Board of Revenue (FBR) authority to freeze large-value transactions made by non-filers, close down businesses that are not registered, and seize goods.
On the other hand, the government plans to request the National Assembly to approve in an ex-post facto manner almost PKR 345 billion of additional expenditure incurred during the current fiscal year without prior parliamentary authorization. This involves huge outlays on power sector subsidies (PKR 115 billion), armed forces (PKR 59.5 billion on counter-terrorism, defence projects, and security divisions) and other unbudgeted expenditures such as flood relief and parliamentarian schemes. This indicates misplaced budgeting and possibility of violating IMF undertakings on restraining supplementary grants. Also, the reduction in the income tax rate on the first slab (Rs600,000Rs1.2 million per year) was announced, to be reduced by five percentage points to 2.5%, to compensate for the higher fiscal impact of a 10-percentage point increase in government salaries, previously planned to be six percentage points. This change increases the financial load by about PKR28 billion. The minister justified huge increases in salary of lawmakers and ministers, by indicating that there had been no increase since 2016, and noted that the introduction of a contributory pension scheme to armed forces personnel was delayed as consultations were still ongoing. The government too had postponed the increase of the minimum wage because the industry was not willing to adjust the earlier rate.
On the brighter side, Pakistan will surpass its annual target of remittances, having received $35 billion in the first 11 months of FY25, and is expected to get over $38 billion by the end of the year. The exchange rate stability and restricted imports have caused this strong growth due to increased labour exports to Saudi Arabia and large increment of labour by the UAE, EU countries and the UK.
Nevertheless, there are still doubts about the ambitious FBR tax target of PKR 14.1 trillion in FY26, which some analysts reckon that it is not realistic, depending on optimistic GDP growth expectations and insufficient taxation of undertaxed sectors. The government growth estimate of 4.2 percent is also viewed as difficult considering that public development expenses are decreasing and major industrial and agricultural sectors are shrinking, with the IMF having its own estimate of 3.6 percent in FY26.
A World Bank’s recent recalibration of poverty lines however gives a dreary picture with the bank estimating that out of the total population of Pakistan (107.03 million) more than 44.7 percent of the people live below the lower-middle-income poverty line of ($4.20/day) with the extreme poverty line at 16.5 percent of people living below the ($3/day) line. Moreover, these numbers refer to the old data of 2018-19 and therefore, probably underrepresent the situation as of now due to the recent economic devastation and natural disasters.
Further, the government has announced a new move to tax the digital economy from the first of July, which means that e-commerce transactions, such as online shopping, food delivery, and digital entertainment will be taxed. This comprises 0.25-2 percent tax on the online sales made by local sellers, 2 percent sales tax on each digital transaction, and 5 percent tax on the payments made to foreign sellers and foreign digital advertisement. Although these steps have an objective of revenue generation, there is concern about the effects of these steps on the small businesses and the ability of courier companies to collect the taxes. (“Budget 2025-26: Threat of PKR500bn tax hike if enforcement measures blocked,”Dawn, 12 June 2025); (“NA nod sought for PKR 345 billion spending,”The Express Tribune, 12 June 2025); (“Pakistan gets robust inflow of $3.7bn in May,” Dawn,12 June 2025); (“Lack of direction,”Dawn,12 June 2025);(“Taxing e-commerce,”Dawn,12 June 2025); (“Poverty Spike,” The Express Tribune,12 June 2025)
PM Sharif accompanied by a high-level delegation leaves for UAE
On 12 June, Dawn reported that PM Shehbaz Sharif, along with a high-level delegation that includes Deputy Prime Minister and Foreign Minister Ishaq Dar, federal ministers and senior ministers, is making an official visit to the United Arab Emirates (UAE) on 12 June. The meeting is meant to "express gratitude" for the UAE's support for Pakistan during the recent India-Pakistan conflict. The delegation is set to hold talks on "a wide range of bilateral, regional, and global issues of mutual interest and concern," with the UAE leadership including the President of UAE and Ruler of Abu Dhabi, Sheik Muhammed bin Zayed Al Nahyan. ("PM leaves for UAE today on official visit," Dawn, 12 June)
Khyber Pakhtunkhwa set to release provincial budget on 13 June; aims to focus on developmental projects
On 12 June, The Express Tribune reported on the PKR 2000 billion provincial budget of Khyber Pakhtunkhwa (KP) for Financial Year 2025-26 that is set to be released on 13 June. The current expenditures are over PKR 1800 billion, with a surplus of PKR 180 billion. No new taxes will be introduced, although the existing taxes and rates will be increased. The budget allocated for development is around PKR 433 billion, which also includes funds for the newly merged tribal districts. The government is planning to announce an education emergency in the next fiscal year; this is to provide furniture to all public schools. The province also aims to increase tax collection by 40 per cent and will establish four new cardiac centres. Funds have also been allocated for key infrastructural projects such as the Peshawar-DI Khan Motorway, a new electricity line, the establishment of an insurance company, and the Chashma Right Bank Canal. Support will also be given to vulnerable and low-income populations, along with financial support for Peshawar, Bannu, and DI Khan through the Safe City projects. The development projects will focus on completing ongoing projects and the number of new projects will be capped at 500. A special committee will be appointed to approve projects based on priority and necessity. The timeline for the Annual Development Programme is reduced from 13 to 7 years. The federal government will allocate a total of PKR 1342.78 billion to KP, which will raise the total budget to PKR 2000 billion. Energy subsidies allocated for the tribal districts will be reduced from PKR 65 billion to PKR 40 billion, while a special grant of PKR 80 billion will be given to the merged districts, increased from the current PKR 66 billion. Meanwhile, the Public Sector Development Programme (PSDP) fund allocated for the merged tribal areas will be slightly reduced to PKR 65.44 billion.( Ahtisham Bashir, “K-P to unveil Rs2tr tax-free budget,” The Express Tribune, 12 June 2025)
In Brief
POLITICS
Imran Khan’s bail hearing postponed, party chairman highlights the declining state of Pakistan’s judicial system
On 12 June, Dawn reported that the bail hearing of Imran Khan and Bushra Bibi in the EUR 190 million case was postponed by the Islamabad High Court (IHC) after Justice Mohammad Asif went on leave. The case was removed from the cause list, prompting senior PTI leaders, such as party chairman Barrister Gohar Ali Khan, Omar Ayub, Ali Amin Gandapur, and Imran Khan’s sister Aleema Khan to visit the IHC to seek a new hearing date. The court rescheduled the hearing for 26 June. Speaking to the media, Gohar expressed disappointment over the delay but remained positive about Mr Khan’s early release. He criticised judicial inefficiencies, urging case proceedings to be completed within a month. He also referred to Pakistan’s drop to 129th rank in the Rule of Law Index, down from 97th in 1996, highlighting it as a serious reflection of the declining state of the justice system. (Malik Asad, “Imran’s bail plea hearing cancelled, but Gohar expects his early release,” Dawn, 12 June 2025)
Punjab, Sindh ministers clash over local elections
On 12 June, The Express Tribune reported that Information ministers from Punjab and Sindh clashed over the local governments and governance in their provinces. Punjab is governed by the PML-N whereas PPP governs Sindh. The verbal clash comes amid pressure for local government elections in Punjab, which are overdue for months. Sindh Information Minister Inam Memon questioned PML-N's reluctance to hold local elections and said that the actions are undermining the constitution. This agitated Punjab counterpart, Azma Bukhari. She mocked the votes secured by PPP in provincial and assembly constituencies and claimed that their strength will soon be tested. (“Punjab, Sindh clash over local governance”, The Express Tribune, 12 June 2025)
ECONOMY
Federal Bureau of Revenue to clampdown on sectors involved in tax evasion practices
On 11 June, the chairman of Federal Bureau of Revenue Rashid Mahmood Langrial informed about the incoming reforms to decrease tax evasion. He pledged to clamp down upon those sectors which are involved in tax evasion, enhance “digital monitoring” and look into the ambiguities which allow the tobacco industry to dodge taxes. He claimed that the reforms introduced in the sugar industry had led to a 39 per cent surge in taxes. Further, he claimed that the reforms in the tobacco industry would also lead to decrease in tax evasion practices. He also informed about the crackdown on the poultry industry where there were reports of tax dodging.
(Arsalan Ali Rao, “Budget 2025-26: After sugar, FBR sets its sights on tobacco sector,” Dawn, 12 June 2025)
Karachi's K-IV water project burdened by severe budget cut; 10-year delay and exacerbated water crisis anticipated
On 12 June Dawn reported that Karachi's "much-delayed" K-IV water project was hit with a budget slash from the required PKR 40 billion to PKR 3.2 in the budget for the Fiscal Year (FY) 2026. The project was conceived in the early 2000s as a solution to Karachi's water crisis but has been delayed for two decades due to "multiple revisions, cost escalations, and bureaucratic hurdles." The K-IV water project was set to be completed within a year with the projected budget, but the reduced budget will reportedly delay the project by another ten years, exacerbating Karachi's acute water shortage. Asad Umar, former Federal Minister of Planning, Development, Reforms and Special Initiatives who oversaw the project from 2018-2022 criticized the budget cut, stating that "it's merely a political statement, not a development commitment." ("K-IV pushed back 10 years or more by 'paltry' budget allocation," Dawn, 12 June 2025)
SOCIETY
On the state of justice system in Punjab
“This dramatic disparity, where the acquittals more than double the convictions, casts a long shadow over the efficacy of our justice system,” highlights an editorial in The Express Tribune
On 12 June, an editorial titled “Impunity prevails,” in The Express Tribune stated that out of 60,000 registered cases of violence against women and children this year, only 924 were convicted, while more than double the convictions i.e. 2,388 accused were acquitted. This vast disparity highlights systemic failure. The crux of the problem is law enforcement. Official reports state "gross negligence" in law enforcement, poor investigations, and lack of evidence as the cause for such low conviction rates. Survivors, already enduring immense emotional and psychological distress, are re-traumatised when justice fails due to such lapses. Such failures erode public trust and deny closure to victims. It calls for an urgent revamp of investigative and prosecutorial systems. A special committee must be established to ensure accountability and strict punishment “as a necessary deterrent.” (“Impunity prevails,” The Express Tribune, 12 June 2025)
ENVIRONMENT
Pakistan faces heatwave crisis; leaves cities at a standstill
On 11 June, Dawn reported on the severe heat waves that Pakistan faced over the past week. Authorities issued a high alert and urged people to stay indoors and be hydrated. The cities of Bhakkar and Jacobabad recorded a peak temperature of 49°C. While the cities in Punjab including Sargodha, Gujranwala/Hafizabad, and Lahore faced temperature between 46- 47 °C. Other regions have also been highly affected by this. It also included Sindh’s Mohenjo-Daro (48 °C), Larkana and Sukkur (47 °C), and Karachi (40 °C with 70 per cent humidity). Also Khyber Pakhtunkhwa, Peshawar, Balochistan’s Sibi, and Turbat registered temperatures of 45- 47 °C. Also, the authorities offered cool drinking water in all major public spaces and essential medical supplies were restocked to prepare hospitals. The Pakistan Meteorological Department forecasted that there will be no relief for 48-72 hours. DG Irfan Ali, Kathia, stated that it was a life-threatening situation, highlighting the urgent need for measures for vulnerable populations.(“Extreme heat sears cities across the country,” Dawn, 11 June 2025)
ON INDIA
India hindering Trump’s mediation efforts, claims Bilawal Bhutto
On 11 June, PPP Chairman Bilawal Bhutto termed New Delhi’s statements regarding the India-Pakistan military confrontation and terrorist attack in Pahalgam as “lies and propaganda.” He claimed that US President Donald Trump’s “mediation” efforts were being hindered by the government of India. Further, putting allegations against India, he claimed that the intelligence agencies had a hand in eliminating “Sikh activists” in other countries.
On the same day, Foreign Office criticized India’s External Affairs Minister S. Jaishankar for calling Pakistan as “Terroristan” in Brussels. The Foreign Office termed Jaishankar’s statements as “irresponsible” and suggested that New Delhi should avoid promulgating “misleading narrative.”
On 12 June, an editorial in The Express Tribune titled “US mediation offer” discussed the possibility of “third-party mediation” in solving the dispute over Jammu and Kashmir. The editorial asserts that the dispute must be seen as something which could turn into a “global flashpoint.” The editorial claims that New Delhi over the years, has continually dismissed the possibility of mediation from any third country, however, it sees Trump’s recent statements over the dispute as “notable departure” The editorial argues that the dispute over Jammu and Kashmir cannot be left undetermined on the pretext that only India and Pakistan should be involved in resolution process.
On the same day, an editorial in Dawn titled “Kashmir mediation,” called out India for continually rejecting mediation from third parties in resolving the dispute over Jammu and Kashmir. The editorial highlights how India has consistently asserted that the dispute is its own domestic issue. The editorial opines that India’s assertion has roots in its alleged notion of increased self-relevance. The editorial argues that if India does not want mediation from any third party, it must resume talks with Pakistan for resolving pending disputes.
(“Bilawal slams India for sabotaging Trump's peace efforts,” The Express Tribune, 12 June 2025; “FO rejects Indian FM's 'irresponsible' remarks,” The Express Tribune, 11 June 2025; “US mediation offer,” The Express Tribune, 12 June 2025; “Kashmir mediation,” Dawn, 12 June 2025