An Analysis
English Translation:
Most measures in the budget do not directly benefit the common man. However, salaried individuals, businesses, and property owners will certainly get some relief. There will be changes in real estate buying and selling. Increased activity in property transactions could lead to more employment for laborers, masons, cement, steel, and the entire construction sector. This is the most real indirect benefit that could reach the common man.
Reduction in property tax (abolition of 7E, reduction in 236C/236K): On a plot worth one crore rupees, the buyer will save approximately 125,000 rupees.
For the salaried class, tax rates have been reduced in four income slabs. For example, the rate for those earning 22 to 32 lakh rupees annually has been set at 20%, and for those earning 32 to 41 lakh, it has been reduced from 30% to 25%.
Indirect Benefits
The abolition/reduction of super tax and reduction in export taxes aim to support industry and exports. The idea behind this is to boost investment and create jobs. However, this is “trickle-down” economics — the benefit reaches the bottom very little and very late.
The reduction in foreign card transaction tax (from 5% to 0.5%) and IT export concessions are for those spending abroad and for IT companies.
The common man’s real problems — inflation, indirect taxes (GST at 18%), electricity and fuel prices — are nowhere to be found in this list. This budget provides relief to the documented class and capital; for the majority living in the informal economy, the benefit is indirect, uncertain, and delayed. In the language of Closed Loop analysis, this relief circulates only within the closed circle.
The Debt Wheel and Shrinking Fiscal Space
The federal government’s total estimated expenditure is 18,771 billion rupees, out of which 8,054 billion rupees will go solely toward debt servicing (interest payments). The federal government’s net revenue is 11,751 billion rupees — meaning nearly 69% of net revenue will be consumed just by interest. In other words, the state will spend more than two-thirds of its earnings on paying for past decisions, and the remaining one-third will have to cover defense, salaries, pensions, subsidies, and development.
The reduction in debt-to-GDP ratio (from 75% to 68.5%) is undoubtedly a positive development.
In the federal development program, only 25.1 billion rupees have been allocated for health, 46 billion for higher education, and 26.3 billion for school and college education.
The least discussed but far-reaching point in the budget is the “arrangement” given the attractive name of Cooperative Federalism. The FBR’s expected collection is 15,264 billion rupees, but 13,350 billion has been “reserved” for distribution to the provinces. Any collection above this will be available as grants under Article 164 for “national strategic needs.”
Last year, inflation had come down to 4.5%, but in the same breath, the target for next year’s average inflation has been set at 8.2%. This is actually a suppressed admission that price pressures are returning and the coming year will be more expensive for the common man than the previous one.
The growth target has been set at 4% — stable, but insufficient for a population where millions of young people enter the job market every year. Experts agree that Pakistan needs sustained growth of 6 to 7% for any real reduction in poverty. In this context, being satisfied with 4% is stability, not transformation.
The FBR target of 15,264 billion rupees is 17.6% higher than the current year. The claim is that this increase will be achieved without imposing new taxes, purely through enforcement and compliance. Enforcement-based targets have traditionally not been met in our country, and when they fall short, it is usually the salaried and documented sector that pays the price through a mini-budget midway through the year — the same sector that is already bearing the burden of the system.
The initial results of production monitoring and digital invoicing are encouraging, but the expected gains of 61 billion and 34 billion are still estimates, not actual collections.
FBR’s Faceless Model: National Faceless Center, single and double-blind modes, automatic case allocation, and division of powers — if implemented honestly, these reforms can break the relationship of discretion and harassment between tax officers and citizens, which is the root of corruption. This is intellectually the most solid part of the budget.
Fixed Tax for Small Shopkeepers: 1% of annual sales, a one-page Urdu return, exemption from audit, and the concept of a green slab — for the first time, instead of scaring the retail sector, a path has been shown. This psychological step toward a documented economy is important.
The abolition of taxes on sanitary pads and contraceptives is small financially but a big step culturally. Prioritizing family planning in the budget of the world’s fifth-largest country falls into the category of “better late than never.”
BISP Program: Extending social protection to 12.2 million families under the Kafalat program and educational scholarships to 9.2 million children, with an allocation of 838 billion rupees, is a meaningful expansion of the social safety net.
Reforms in the Energy Market: The launch of a competitive electricity market under CTBCM and achieving net-zero accumulation of circular debt — if sustained — would be the first real treatment for this sector’s decades-old structural disease.
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