The 2025–26 budget indicates the fiscal restriction and the modest climate intention, but it remains, in its nucleus, an act of improvisation instead of coordinated choreography.
Promoted as contractive, the budget establishes ambitious objectives: 3.9% fiscal deficit of GDP and a record primary record of 2.4%. However, these figures rest on a weak base. Fiscal measures remain regressive, offering relief of the file while charging common citizens.
With an increase in the advantages for parliamentarians and the stagnation of developing spending, the budget reflects an elitist inclination. Indirect taxes dominate, while the key sectors such as real estate, retail trade and agriculture remain undertaken.
While the investment climate is still gloomy: LSM was reduced 1.52% (10mfy25), and public investment moves up the debt service, pensions, soe losses and circular debt. Ergo, the economy remains biased towards the search for rent and consumption.
Despite the ease of inflation and improved reserves, these short -term gains masked a crumbled growth base. Pakistan occupies the 168th position of 193 at the UN HDI and the last in the global report Gender Gender Report 2025 of the Wef, which reflects a deep gender inequality and a chronic investment in education, health and well -being.
While fiscal problems dominate the headlines and public discourse, Pakistan’s climatic vulnerabilities are equally alarming. Classified as the most vulnerable in 2022, its cities constantly face: air pollution, inappropriate drainage, flood and drought paradox and effects of the island of heat.
According to the latest economic survey, the year 2024 was recorded as the ninth warmer year of Pakistan in the last 64 years. In addition, Pakistan occupies the 178th of 180 in the global environmental performance index, highlighting severe challenges in air quality, water resources and
Climate action
Despite this, the fiscal response remains in conflict. Budget 2025–26 incorporates the weather through a Climate Budget Labeling System (TCC) into more than 5,000 federal cost centers, critics argue that often equals a mere brand change of existing projects, such as hydroelectric dams, under a climatic label. Mitigation allocations have increased 183%, adaptation by 83% and governance -related spending is RS28.3 billion.
However, these profits are undermined by significant cuts, with a reduced disaster preparation by 30% and the reduction of reduced contamination by 66%, which suggests a reactive climate strategy instead of proactive. Meanwhile, the budget of the Ministry of Climate Change has been reduced from RS3.5 billion to RS2.7 billion, and the environmental protection allocation was reduced by half of RS7.2 billion to RS3.1 billion.
Policy contradictions weaken the impact even more. A 2.5% carbon tax has been imposed to discourage the use of fossil fuels, but without a structural reform, it feels like another load for the poor. Meanwhile, tariffs on import panels have been increased, and now hybrid and electric vehicles are taxed.
The worrying majority is the continuous dependence of fossil fuel income; 81% of the so -called “green” income come from oil levies, an obvious fiscal paradox where climate financing depends on heavy carbon sources. These mixed signals have generated criticisms such as “absurd contradictions” that undermine clean energy objectives.
The cherry at the top? Worldwide, the landscape is not encouraging. Multilateralism is eroding. The EU carbon edge adjustment mechanism (CBAM), American protectionism and insufficient Cop promises underline the broad abyss between rhetoric and reality.
The COP29 “Baku to the Belem roadmap at 1.3T” remains aspirational, with only $ 350 billion promised of the target of $ 1.3 billion, echoing the broken commitment of $ 100 billion per year of the Paris Agreement. For developing countries such as Pakistan, waiting for international financing is useless and dangerous.
In this context, it is obvious that two are needed for tango: fiscal reparation and climatic resilience must move in synchronization. Treating them as separate policies is outdated. On the other hand, Pakistan must take advantage of climatic finances as a development tool and fiscal, rethinking its budget through an integrated green lens.
This is how: a well -calibrated carbon tax, which begins at RS1,500/tons and is done to RS2,500, offers a significant opportunity to mobilize national climate finances, potentially generating up to 1.2% of GDP. Unlike the current fragmented frame, this approach could evolve to a hybrid tax and trade system by 2030, aligned with emerging regional carbon markets. It balances climate ambition with fiscal pragmatism, allowing the escalated investment in renewable energy and low carbon infrastructure.
Meanwhile, the plastic industry, which already contributes more than $ 861 million annually in taxes, presents a road for directed packaging levies. Informed by Kenya’s regulatory experience, such measures could finance recycling and public participation systems to reduce urban waste at the source.
Energy subsidies, particularly for oil and electricity, which represent 87% of the RS1,037 billion budget of RS1.037, require urgent restructuring. With circular debt in the electricity sector now around RS2.4 billion, a gradual change of universal subsidies to support directed for vulnerable groups can relieve fiscal pressure while promoting energy transition. Parallel investments in public green infrastructure, especially solar and wind in neglected regions could stimulate green employment and long -term cost savings.
Pakistan’s early success with Green Sukuk’s broadcast indicates the potential of Islamic finances as a sustainability vehicle. By modernizing financial architecture and looking for combined finance strategies, Pakistan can better access the global clean energy investment group of $ 1.8 billion.
Nature -based solutions also justify strategic expansion. Programs such as Costa Rica’s payment model for ecosystems services (PE) or Tsunami itself of one billion pakistan trees could be climbed to finance the conservation of the forest and ecotourism.
Case studies of the Swat Miandam Valley reveal how modest payments can encourage communities while generating environmental value. The rationalization of RS50 billion to RS80 billion in agricultural subsidies could also reduce environmental degradation while reallocating resources towards intelligent climatic practices, such as drip irrigation and organic inputs.
With the availability of per capita water now less than 1,000 cubic meters (below 5,260 in 1951), the prices mechanisms for large -scale users, particularly in the industrial sector, are essential to encourage efficiency and resistance. This is not a income strategy; It is a national imperative against the increase in the climate and the insecurity of water, especially after IWT’s lawyer.
According to the IMF, 10 low -income countries are in debt, 25 have a high risk and 26 face a moderate risk, leaving only seven with low risk. This shows how debt has become a paralyzing burden for more than half of the world’s poorest nations. In developing countries such as Pakistan, the increase in debt is reducing fiscal space and threatening financial stability. Climate debt swaps (DFC) offer a potential solution when canceling or refinancing debt in exchange for climatic investments.
For example, in 2023, Ecuador exchanged $ 1.6 billion in debt for a blue $ 656 million bonus to finance marine conservation.
To make these real and durable changes, Pakistan must implement a set of enabling actions within a coherent fiscal and climatic strategy.
The first thing is the first: the labeling of the climate budget must be stagnant, no more dressing the development of routine as climatic action. Disaster spending should be graduated from the relief of the curite to the first resilience strategy. As Dr. Khalid Waleed has noticed in these pages, all carbon tax revenues and a significant part of the oil tax must flow directly to the climate background of Pakistan, turning climatic taxes into climatic solutions. Pilot deployment, solar roofs in unattended areas, electronic buses, flood -proof housing, with bulletproces to demonstrate impact and co -financing of magnetization.
Then, wire climate in federal architecture. Incorporate transfers based on rules related to the climate in the NFC to train the provinces and districts with funds and knowledge. A fair transition means future proof work: reconstruction with infrastructure resistant to floods and real fossil fuel workers for green concerts, backed by social protection.
Scale intelligent climate agriculture, think of drip irrigation, resistant seeds and water collection to increase yields, reduce losses and heal ecosystems. And yes, he wins hearts and minds: climatic taxes need public support, so he launches mass awareness and sees the curriculum.
Finally, climate governance is intelligent and perfect. Create climate budget units, activate intersector working groups and plug expenses in Integrated Financial Management Panels (IFMIS) for real -time monitoring. Green public hiring, weighted for life cycle emissions and resource efficiency, must guide where the rupee lands.
Build a national carbon record to unlock future carbon market income. Keep honest performance with parliamentary reviews, citizen audits and Think Tank monitors. And do not neglect the future, give young people a seat at each table, from the design of policies to the supervision of the project. Climate credibility depends on it.
Tango between fiscal stability and climatic responsibility cannot be danced with one foot. Pakistan’s crisis is double, so it must be its solution.
Furqan Ali is a Peshawar -based researcher who works in the financial sector.
Arfa Ijaz is an environmental and researcher engineer who works in the energy sector.
Discharge of responsibility: The views expressed in this piece are that of writer and do not necessarily reflect the editorial policy of PakGazette.TV.
Originally published in the news
