letter refers to the news report ‘FBR faces Rs336bn revenue shortfall in first half of current fiscal’ (January 1, 2026). While the nation is halfway through the fiscal year 2025-26, fundamental economic challenges remain un-mitigated and could aggravate. Tax collection shortfalls remain a serious problem. Exports are also at a miserably low level and imports are rising. Agriculture continues to perform poorly while the manufacturing sector remains sluggish. The fiscal deficit remains large as the government appears to be in no mood to further reduce its current expenditure. But the axe has does appear to have fallen on the development budget (PSDP). This could lead to a rise in unemployment and push more people into poverty.
The government takes pride in the increasing SBP reserves, but most of the reserves comprise deposits by friendly countries and funding from the IMF and other international lenders. Dollar shortage is forcing the government to seek repeated roll-overs of deposits from friendly countries. Dependence on borrowing is growing, evidenced by the unsustainable level of national debt, mainly to bridge recurring budget deficits. While the SBP policy rate has seen significant cuts, it has not translated into higher economic activity. It is true that default concerns have abated and some semblance of economic stability has been accomplished. However, in the absence of crucial reforms, default risks can reappear.
Arif Majeed
Karachi
