While Atlas stands

THIS is a story about a government that collects more money every year and yet can’t build anything that works. Govern­ment schools are abandoned for private alternatives, while people only visit government hospitals when they have no choice. Meanwhile, the salaried class pays taxes with mathematical precision, while big land­­lords, traders and property dealers con­­tribute almost nothing. This is Pakis­t­a­­n’s story, where the salaried class has be­­come the nation’s Atlas, bearing the entire fiscal burden on its shoulders, while the elites walk free beneath it.

Will this budget finally say something honest? Consider what has happened to Pakistan’s economy over the last two decades. Remittances, which stood at around $6 billion in 2007, have risen to over $38bn in FY25. This steep rise enabled Pakistan to reduce poverty on paper without transforming the structure of its economy. It did not build competitive industries. It did not develop an export base. For a while, this arrangement worked.

Then came the rupture. Inflation peaked at nearly 38 per cent in May 2023. Food prices rose 30-40pc. The rupee fell from 160 to above 280. Real incomes collapsed for the bottom half of the population. Pakistan today is not simply a poor country; it’s an economically fragile country with millions hovering just above subsistence, one life shock away from falling back. This is the economy the budget must address.

Sadly, the government seems only focused on stabilisation and IMF compliance. We are told that the IMF programme is on track. Pakistan’s external position is stable. Reserves rebuilding has exceeded projections. The current account is balanced and inflation has retreated from its peak. And yet the IMF’s own documents acknowledge that poverty remains elevated and growth subdued. The Middle East conflict adds fresh risks in the shape of upward pressure on inflation and a weaker balance-of-payments. The fact is that stabilisation is not the same as recovery. A country’s economy can stabilise, even as its middle class quietly disappears.

The approaching budget has a narrow window to begin correction.

In FY2024-25, the salaried class paid Rs606bn in taxes, a 55pc increase in a single year. FBR collection rose from Rs4.7 trillion in FY21 to Rs11.7tr in FY25. Still, the tax-to-GDP ratio barely moved. More money is being collected from the same people. The tax base has not broadened. The burden has only deepened.

A salaried worker cannot hide income. Employers deduct taxes before the salary is credited. Each year, tax authorities return to the same well, not because it is the most productive well, but because it is the easiest one to find. The Rs600,000 annual tax-free threshold has become a symbol of this failure. Fifty thousand rupees a month in most urban centres in Pakistan is not prosperity. It is barely subsistence. When a salary increase is granted merely to keep pace with 30pc inflation, the tax system treats it as additional income. Taxing it is not a revenue policy. It is penalising people for remaining in the formal economy.

Meanwhile, the agricultural income of large landowners enjoys near-total protection. Speculative real-estate gains move largely outside the documented net. Informal wholesale and retail sectors operate in comfortable obscurity. The im­­balance is not incidental. It is structural.

Budget FY2026-27 has a narrow window to begin correction. Six things must happen.

First, the tax-free threshold must be raised substantially and indexed to inflation going forward — automatic ind­e­xing, not ann­ual po­­litical discretion. Seco­­nd, the tax base must be genuinely broadened to include agricultu­ral income, real-estate gains and the informal economy. Third, energy circular debt, now Rs5tr across the power, petroleum and gas sectors, must be subjected to an in­­de­­pend­ent audit as the current arran­gem­ent is fiscally uns­ustainable and po­­litically protec­ted. Fourth, the fiscal de­­ficit must be bro­ught to zero over three years through Rs3-4tr reductions in current expenditure, cabinet ratio­nalisation, pensio­­ns reform and PSDP cleansing. Fifth, commercial bank lending to the government must be repriced away from Kibor-plus commercial rates. Last, a three-year binding fiscal framework must replace the current practice of annual improvisation.

Pakistan’s economy has had many stabilisations but it rarely had a structural correction. A stabilisation stops the bleeding. A structural correction builds new tissue. The first is managed with fiscal consolidation and external support. The second requires political courage and a willingness to tax the elites rather than the compliant.

Budget FY2026-27 will not solve Pakistan’s structural problems. No single budget can. But it can credibly signal the direction of travel. Pakistan’s salaried class — its tired Atlas, forced to choose between food and electricity bills — has been waiting for that signal for a long time.

The writer completed his doctorate in economics on a Fulbright scholarship.
aqdas.afzal@gmail.com
X: @AqdasAfzal

Published in Dawn, June 11th, 2026

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