Grow First, Tax Fairly

Summary

• The Pakistan Economic Survey 2025–26 reported Federal Board of Revenue (FBR) tax collection of Rs11.74 trillion in FY2024–25, equivalent to approximately 10.3 per cent of GDP.
• Fiscal consolidation that repeatedly squeezes productive investment risks weakening the very economic base required to sustain public finances.
• Pakistan needs a broader economic base that generates more income and exports, a public sector that earns better returns from its assets, and a tax system that distributes obligations fairly.

AI Generated Summary

Pakistan’s fiscal challenge is no longer simply a shortage of tax revenue. It is a deeper structural problem: an economy that struggles to generate sufficient productive investment, exports and employment while carrying a heavy burden of debt and debt servicing. The country needs a fiscal strategy that expands economic activity, improves public-sector productivity and unlocks the value of assets it already owns. Sustainable revenue must come from a stronger economy, not just a higher tax burden.

The numbers underline the urgency. Pakistan’s total debt and liabilities were reported at approximately Rs99.6 trillion by June 2026. This broad aggregate includes public and private-sector obligations and should not be confused with government debt alone. The composition of these liabilities matters, but so does the economy’s capacity to generate income, mobilise revenue and service debt without repeatedly squeezing businesses, households and productive investment. The State Bank of Pakistan’s debt statistics provide the appropriate starting point for understanding the scale of the challenge.

Growth remains central to this equation. According to the Pakistan Bureau of Statistics’ National Accounts Committee meeting of 19 October 2026, revised real GDP growth for FY2025–26 stood at 3.65 per cent. Although this represents an improvement over the previous year’s provisional growth of 2.68 per cent, it does not yet indicate a decisive transformation in productive capacity. Pakistan needs sustained, investment-led growth to create jobs, expand incomes, strengthen public finances and reduce dependence on borrowing.

Taxation remains essential to financing public services, infrastructure and social protection. Fiscal sustainability requires better compliance, a broader tax base and fair treatment of comparable economic activities. Yet repeated tax increases on an already constrained formal economy cannot substitute for structural reform. Higher costs can discourage investment and weaken competitiveness when informal businesses remain outside the effective tax net, while indirect taxes can place a disproportionate burden on lower-income households.