There was a time, not long ago, when the annual federal budget was something that ordinary Pakistanis really looked forward to. Not because they expected miracles, but because there was usually something in store for them: a reduction in flour prices, a relief on utility bills, a wage increase that at least tried to keep pace with inflation, or a plan that gave a small businessman a fighting chance. The budget was the only moment each year when the government was forced, if only symbolically, to look the average citizen in the eye and say: we see you.
The budget for fiscal year 2026-27, presented June 12, does not offer such timing. Rather, it is a document that speaks the language of macroeconomic stabilization with remarkable fluency, while addressing the concerns of distressed households only in passing. The government points to projected GDP growth of 4.0 percent, inflation set to slow to 8.2 percent and a primary surplus of 2.3 percent of GDP as evidence that the economy is on the right track. By IMF standards of fiscal discipline and compliance, these are notable achievements. Pakistan desperately needed stability after years of economic turbulence.
However, economic stability only makes sense when it translates into a better life for ordinary citizens. Headline inflation may be falling, but food prices remain painfully high for millions of low- and middle-income families. The cost of daily necessities has not decreased simply because international credit agencies are more optimistic about Pakistan’s prospects. In this context, the government has announced a 7.0 percent increase in salaries for public sector employees. After years of inflation that eroded purchasing power, the increase offers little relief. For many workers, this amounts to a continued decline in real income. The 10 percent increase in the minimum wage looks more generous on paper, but in Pakistan’s largely informal economy, its enforcement remains weak.
A closer reading of the finance bill reveals where the burden is being placed. The advance tax on property sales has been increased from 1.0 percent to 2.75 percent. The advance tax on property purchases has also been increased. For a family buying a modest house valued at Rs 10 million, this amounts to additional costs before accounting for stamp duty, capital value taxes and other transaction-related charges.
The finance bill also introduces a tax on profits derived from certain life insurance and family takaful policies if they are canceled within seven years. For many middle-class Pakistanis, these products are not luxury investments but disciplined savings vehicles used to plan for education, emergencies or retirement. Taxing these earnings may seem minor from a tax perspective, but it sends an unfortunate message to citizens who have tried to save responsibly.
Similarly, token taxes on vehicles in the Islamabad Capital Territory have been linked more closely to invoice values. As vehicle prices increase, tax obligations will automatically increase, creating an additional recurring cost for vehicle owners.
At the same time, the government has abolished Section 7E of the Income Tax Ordinance, which imposed income tax on high-value properties above a specific threshold. Whether you agree with the tax or not, its elimination benefits owners of significant real estate far more than it does wage-earning households. The contrast is hard to ignore.
However, the most significant impact of this budget may not come from a single measure. It will come from the broader revenue strategy that underpins it. The FBR has been given an ambitious revenue target. Achieving that goal requires raising huge additional sums from the economy. However, imposing significant taxes on large agricultural holdings remains politically difficult, and widening the direct tax net to catch persistent tax evaders remains an unfinished project. As a result, governments often turn to the instruments that are easiest to apply: indirect taxes, withholding taxes and greater pressure on those who are already documented and compliant.
This means that the burden falls disproportionately on salaried employees, registered businesses and consumers. The Finance Bill also increases penalties under the Sales Tax Law, with significantly higher fines for non-compliance and failures related to digital integration requirements. While these measures can improve law enforcement, companies rarely absorb these costs indefinitely. They are eventually passed on to consumers through higher prices.
The budget also reveals a lot about the state’s priorities. A nation cannot build sustainable prosperity with overcrowded hospitals, underfunded schools, and graduates entering an economy unable to absorb their skills. On this front, the budget offers continuity rather than transformation. The question, therefore, is: who is this budget designed for? The answer is not entirely far-fetched. Pakistan remains dependent on external financing and international trust. The government must meet IMF requirements, reassure investors and maintain credibility with lenders. Ignoring these realities would be irresponsible. But recognizing those limitations does not absolve policymakers of responsibility to the public.
The budget contains enough politically marketable initiatives, youth programs, training programs and targeted relief measures to support the government’s narrative. However, the average Pakistani citizen remains largely absent from their core priorities. The millions of people who pay GST on every purchase, face withholding taxes on routine transactions and rely on public services that often fail them, are once again being asked to bear a disproportionate share of the adjustment.
Let us consider a salaried worker who earns between Rs 50,000 and Rs 70,000 per month. Their purchasing power has already been weakened by years of inflation. Your grocery bill continues to rise. If they hope to buy a modest home, transaction costs are increasing. If they save through an insurance policy, they face new tax implications. If you own a vehicle, recurring taxes continue to increase. If you operate a small business, compliance costs are increasing. None of these measures alone are devastating. Together, they form a constant and persistent pressure on household finances.
There was another path available. The government could have applied more aggressive taxes to large agricultural holdings, expanded direct taxes to under-taxed sectors or introduced stronger measures targeting concentrated wealth. It could have used the fiscal breathing space created by improving macroeconomic indicators to invest more substantially in public health, primary education and social mobility. He decided not to do it.
This is not because Pakistan lacks capable economists or competent policymakers. That’s because Pakistan’s political economy has long rewarded those with the clout to resist taxes, while placing a heavier burden on those least able to avoid them. Budgets are more than financial documents. They are declarations of national priorities. They reveal, more honestly than speeches or slogans, what a government values and who it chooses to protect.
By that measure, the 2026-27 budget returns a clear verdict. The language of stability, discipline and reform is everywhere. The language of shared sacrifice is not. Ordinary Pakistanis will find the true meaning of this budget not in official projections or fiscal targets, but in their monthly expenses, their declining purchasing power, and the growing gap between the economic recovery on paper and domestic economic reality.
Writer posts @FarrukhJAbbasi
Disclaimer: The views expressed in this article are those of the writer and do not necessarily reflect the editorial policy of PakGazette.tv.
Originally published in The News
