Fiscal reforms’ missing piece
Finance Minister Muhammad Aurangzeb pledges to stay the course on fiscal reforms, but analysts warn that without broadening the tax base, Pakistan’s fiscal stability remains fragile.
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Desk Analysis
How This Affects the Exchange
Sector Effect
Negative · Do not buy
Broad fiscal weakness and narrow tax base pose risks to all listed sectors, so investors should avoid buying.
Sectors & Direction
Desk read
Desk call: Do not buy · Negatively affected
- BanksNegatively affected
- Oil & GasNegatively affected
- CementNegatively affected
- PowerNegatively affected
- FertilizerNegatively affected
- TextileNegatively affected
Companies
Mentions in This Briefing
Sectors: Banks, Oil & Gas, Cement, Power, Fertilizer, Textile — Negative · Do not buy. PSX tickers: MEBL, MCB, UBL, HBL, BAHL, FABL. Broad fiscal weakness and narrow tax base pose risks to all listed sectors, so investors should avoid buying.
Full Story
Open on Business Recorder## Government’s Fiscal Discipline Gains
The finance ministry reports that Pakistan’s fiscal deficit has fallen to about 2.6% of GDP – the lowest level in 22 years – and the country has posted three consecutive primary surpluses. These figures signal improved fiscal discipline.
## Tax Base Still Too Narrow
Despite the deficit reduction, the editorial notes that most of the increase in tax revenue has come from higher extraction from existing taxpayers rather than adding new contributors. Federal Board of Revenue (FBR) collections rose 40% over two years to Rs13 trillion, lifting the tax‑to‑GDP ratio from 8.8% to 10.3%. The Asian Development Bank (ADB) urges the government to expand the tax base to a long‑term target of 13%.
## Sectors Escaping Taxation
The piece highlights that retail, wholesale trade, real estate and other high‑activity sectors continue to enjoy preferential tax treatment. Repeated attempts to bring these sectors into the net have faltered due to political resistance, protests, and weak enforcement. The government is promoting digital invoicing, track‑and‑trace, faceless customs and digital production monitoring, but the editorial argues that technology alone cannot replace political will.
## Risks to Fiscal Sustainability
A broader and more efficient revenue base would lessen reliance on borrowing, freeing fiscal space for health, education and infrastructure, and reducing debt‑service pressure. Without it, Pakistan risks recurring boom‑and‑bust cycles, widening fiscal and trade deficits, and renewed stabilization programmes.
## Call for Political Resolve
The editorial concludes that expanding the tax net must become the central objective of any reform agenda. Failure to do so could merely postpone the next fiscal crisis, undermining long‑term economic stability.