There are rare moments in the life of a nation when conventions, circumstances, and laws all 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 going through one now.
Three years ago, the country was on the brink of an economic crisis. Foreign exchange reserves were collapsing, inflation was soaring, and there was widespread talk of default. Policymakers were consumed by survival. A single criterion judged every decision: would it help Pakistan get through the next month?
The stability Pakistan enjoys today is neither automatic nor free. It is earned with effort. Businesses and households bore the burden of adjustment. Taxes on manufacturing and the formal sector increased. Wage earners faced some of the highest effective tax rates in the country’s history. Public spending was restricted. Development priorities were postponed. Economic growth slowed as authorities prioritized stabilization over expansion.
The IMF provided an anchor for stabilization and a framework for restoring fiscal and external discipline. Many of the measures taken were painful and controversial, but they helped avoid a much 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 its potential, but Pakistan is no longer on the brink 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.
However, stabilization was never the goal. Its objective was to create the fiscal and political space necessary for reform, growth and shared prosperity. That’s why the FY27 budgets are important. Their importance does not lie in a particular fiscal measure or spending allocation. It is the opportunity to go from stabilization to transformation. The most important question is whether the federal and provincial budgets are working together to improve the lives of 250 million Pakistanis. The federation remains responsible for debt service, 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 pact, not necessarily a new constitutional agreement, but a new shared commitment by federal and provincial governments to broaden the tax base, improve the quality of spending, invest in human capital, strengthen local governments, accelerate digital transformation and create conditions for growth and job creation.
But tax reform is not just about raising more revenue. It’s also about raising revenue fairly.
Tax morale depends on fairness, not on increasing burdens on the same taxpayers. Indirect taxes, such as the oil tax, cannot replace genuine tax reform either. Sustainable incomes require a broader, fairer and more growth-friendly tax system.
Therefore, the debate should go beyond the arithmetic of income and expenses. Budgets are not judged by what they allocate, but by what they achieve. Are the children learning? Are hospitals delivering better outcomes? Are cities becoming more productive? Are companies investing? Are jobs being created?
These are the metrics that matter, because they reveal how far Pakistan has to go from stabilization to prosperity. A successful federation does more than divide resources; aligns incentives and accountability, rewards revenue effort, and links spending to results. These may seem like technical reforms. In reality, they determine whether Pakistan’s future is determined by productivity and opportunity or by recurring cycles of crisis and adjustment. For too long, Pakistan’s fiscal debates have focused on managing shortages. The FY27 budgets offer an opportunity to create prosperity.
For years, Pakistan has been concerned about avoiding the worst. FY27 offers the opportunity to look for the best. History rarely announces turning points in advance. They often arrive disguised as budget documents and fiscal tables. However, behind the figures lies a broader choice.
Pakistan can treat FY27 as another budget cycle. Or you can use this moment to make the bold decisions that reform demands. The question is whether we dare to take advantage of it.
The writer is a former advisor to the Ministry of Finance. He tweets @KhaqanNajeeb and can be reached at: [email protected]
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
