Keeping the fiscal deficit at 0.7 per cent of GDP over the first nine months of the current fiscal year (2025-26) is no mean feat. This is reportedly Pakistan’s lowest recorded fiscal deficit in at least 27 years. Despite revenue collection still being below target, the government appears to have done a good job of stabilising the fiscal front, with the deficit standing at 2.6 per cent of GDP over the first nine months of the previous fiscal year (2024-25). Amid the revenue shortfall, the FBR managed to contribute Rs9.3 trillion to national revenues, while non-tax revenues amounted to Rs4.6 trillion. The largest chunk of the latter came from SBP profits of Rs2.428 trillion, while the petroleum levy added around Rs1.205 trillion. The IMF is reportedly pleased with the curtailing of the fiscal deficit, while the primary balance, considered sacrosanct under the IMF programme, stands at 3.0 per cent of GDP over the first nine months of FY2025-26. It is good to see that all the tax, tariff and levy pain the ordinary, salaried citizen has been put through over the past two years or so has not been for nought. However, one cannot help but ask if there could not have been better and fairer ways to achieve this fiscal consolidation.
By now, the unjust distribution of the country’s tax burden is well documented, with the income tax contribution of the salaried alone outstripping exporters, retailers and buyers and sellers of property combined. Meanwhile, indirect taxes like the petroleum levy or the sales tax, also fall harder on ordinary people who spend rather than save or invest a greater share of their income than the wealthy. Stagnant wages and a tough job market only compound the burden. Given the energy shock from the fallout of the Middle East conflict, the petroleum levy has become particularly controversial. Consumers in Pakistan are paying almost Rs145 per litre in taxes on petrol, with the Petroleum Development Levy accounting for Rs117.41 per litre. This means around a third of the current price of petrol, with the maximum depot price of petrol standing at Rs414.78 per litre, is taxes. If the goal here is to reduce the demand for petrol at a time when it is hard to obtain, perhaps this makes sense, but it is not a good look to be taxing petrol so heavily at a time when prices at the pump have reached shocking levels.
If revenue collection and IMF pressures are the reasons for the high levy, then one must ask when exactly others will start paying their due. When will the tax net be broadened? That too is something that the IMF has pushed for after all. And what about all the other structural reforms that the government has promised and/or agreed to? And if ordinary Pakistanis are to continue being called upon to pay more in taxes, there has to be some sort of plan to at least boost wages and employment. Squeezing a near-empty tube for the last drops of paste is no sustainable way to run a country or an economy.
