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 living through one now.
Three years ago, the country stood on the brink of an economic crisis. Foreign exchange reserves were collapsing, inflation was surging, and default was being widely discussed. Policymakers were consumed by survival. A single criterion judged every decision: would it help Pakistan make it through the next month?
The stability Pakistan enjoys today is neither automatic nor costless. It is hard won. Businesses and households bore the burden of adjustment. Taxes on manufacturing and the formal sector increased. Salaried individuals faced some of the highest effective tax rates in the country’s history. Public spending was restrained. Development priorities were postponed. Economic growth slowed as policymakers prioritised stabilisation over expansion.
The IMF provided an anchor for stabilisation and a framework for restoring fiscal and external discipline. Many of the measures adopted were painful and controversial, but they helped avert a far more damaging outcome. Today, the conversation is different.
Inflation has fallen sharply from its peak. External balances have improved. Foreign exchange reserves have recovered. Revenues have increased and fiscal discipline has begun to restore credibility. The economy remains fragile and growth remains below potential, yet Pakistan is no longer standing on the edge of a cliff.
The road has been difficult, but it has brought Pakistan to something it has not enjoyed for many years: a moment of choice.
Yet stabilisation was never meant to be the destination. It was meant to create the fiscal and political space needed for reform, growth, and shared prosperity. That is why the FY27 budgets matter. Their significance lies not in a particular tax measure or expenditure allocation. It lies in the opportunity to move from stabilisation to transformation. The more important question is whether federal and provincial budgets are working together to improve the lives of 250 million Pakistanis. The federation remains responsible for debt servicing, defence, pensions and other national obligations. Provinces oversee education, healthcare, agriculture, municipal services and much of the public service delivery that citizens experience every day.
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, federal and provincial governments are preparing budgets from a position of relative stability. The task now is to turn stability into reform. That requires a new fiscal compact — not necessarily a new constitutional arrangement, but a new shared commitment by federal and provincial governments to expand the tax base, improve spending quality, invest in human capital, strengthen local governments, accelerate digital transformation and create conditions for growth and job creation.
But fiscal reform is not only about collecting more revenue. It is also about collecting revenue fairly.
Tax morale depends on fairness, not ever-higher burdens on the same taxpayers. Nor can indirect levies such as the petroleum levy substitute for genuine tax reform. Sustainable revenues require a broader, fairer and more growth-friendly tax system.
The debate should therefore move beyond the arithmetic of revenues and expenditures. Budgets are judged not by what they allocate, but by what they achieve. Are children learning? Are hospitals delivering better outcomes? Are cities becoming more productive? Are businesses investing? Are jobs being created?
These are the metrics that matter, for they reveal how far Pakistan still has to travel from stabilisation to prosperity. A successful federation does more than divide resources; it aligns incentives and accountability, rewards revenue effort and links spending to results. These may appear to 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, Pakistan’s fiscal debates have focused on managing scarcity. The FY27 budgets offer an opportunity to build prosperity.
For years, Pakistan has been preoccupied with avoiding the worst. FY27 offers a chance to pursue the better. History rarely announces turning points in advance. They often arrive disguised as budget documents and fiscal tables. Yet beneath the numbers lies a wider choice.
Pakistan can treat FY27 as another budget cycle. Or it can use this moment to make the bold decisions that reform demands. The question is whether we dare to seize it.
The writer is a former adviser, Ministry of Finance. He tweets @KhaqanNajeeb and can be reached at: [email protected]
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
2026-06-10 10:31:00
