THERE are rare moments in the life of a nation when convention, circumstance and law point in the same direction. The need for change becomes undeniable. The opportunity to act presents itself. The constitutional framework already exists.
Pakistan might be living through one now.
Three years ago, the country was on the brink of an economic crisis. Foreign reserves were collapsing, inflation was rising and default was widely discussed. Politicians were consumed with survival. A single criterion judged each decision: would it help Pakistan get through the next month?
The stability that Pakistan enjoys today is neither automatic nor costless. It is hard won. Businesses and households bore the burden of adaptation. Taxes on manufacturing and the formal sector increased. Wage earners faced some of the highest effective tax rates in the nation’s history. Public consumption was held back. Development priorities were postponed. Economic growth slowed as policymakers prioritized stabilization over expansion.
The IMF provided an anchor for stabilization and a framework for restoring fiscal and external discipline. Many of the measures adopted were painful and controversial, but they helped avert a far more damaging outcome. Today the conversation is different.
Inflation has fallen sharply from the peak. The 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 is below potential, but Pakistan is no longer standing on the edge of a cliff.
The road has been difficult, but it has brought Pakistan something it has not enjoyed for many years: a moment of choice.
Yet stabilization was never meant to be the destination. It was meant to create the fiscal and political space necessary for reform, growth and shared prosperity. This is why the FY27 budgets matter. Their importance does not lie in a specific tax measure or expenditure distribution. It lies in the possibility of going from stabilization to transformation. The more important question is whether federal and provincial budgets are working together to improve the lives of 250 million Pakistanis. The Confederation remains responsible for debt servicing, defence, pensions and other national obligations. Provinces oversee education, health care, 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 implementation. Success requires adaptation.
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. It requires a new fiscal deal – not necessarily a new constitutional arrangement, but a new joint 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 the conditions for growth and job creation.
But fiscal reform is not just about collecting more revenue. It is also about collecting the revenue fairly.
Tax morality depends on fairness, not ever-higher burdens on the same taxpayers. Nor can indirect taxes such as the oil tax replace a genuine tax reform. Sustainable revenues require a broader, fairer and more growth-friendly tax system.
The debate should therefore go beyond the arithmetic of income and expenditure. Budgets are judged not by what they allocate, but by what they achieve. Do children learn? Are hospitals delivering better outcomes? Are cities becoming more productive? Are companies investing? Will jobs be created?
These are the metrics that matter because they reveal how far Pakistan still has to travel from stabilization to prosperity. A successful federation does more than share resources; it aligns incentives and accountability, rewards revenue effort and links spending to results. These may appear to be technical reforms. In reality, they determine whether Pakistan’s future is shaped by productivity and opportunity or by recurring cycles of crisis and adaptation. For too long, Pakistan’s fiscal debates have focused on managing scarcity. The FY27 budgets provide an opportunity to build wealth.
Pakistan has for years been preoccupied with avoiding the worst. FY27 provides a chance to pursue it better. History rarely announces turning points in advance. They often arrive disguised as budget documents and tax tables. But beneath the numbers lies a wider range.
Pakistan can treat FY27 as another budget cycle. Or it can use this moment to make the bold decisions that reform requires. The question is whether we dare to seize it.
The writer is a former adviser, Ministry of Finance. He tweets @KhaqanNajeeb and can be reached at: [email protected]
Disclaimer: The views expressed in this piece are the author’s own and do not necessarily reflect Pakinomist.tv’s editorial policy.
Originally published in The News
