rom December to May each year, governments at both federal and provincial levels immerse themselves in the ritual of budget preparation. Budget calls are issued, ceilings are circulated, strategy papers are drafted and projections are assembled. On paper, it appears to be a structured and rational exercise. In practice, however, Pakistan’s fiscal policy formulation remains overwhelmingly number-driven and often detached from analysis, realism and outcomes.

At the centre of this process lie the Medium Term Budgetary Framework and the Medium Term Fiscal Framework. These frameworks are meant to provide fiscal direction beyond a single year, anchoring policy in credible macroeconomic assumptions and strategic priorities. Yet, they largely present static projections of receipts and expenditures, adjusted incrementally from previous years. The logic behind the numbers - the assumptions, behavioural responses, reform impacts and risk scenarios - remains obscure or absent.

A deeper examination reveals several structural gaps.

First, there is a persistent macro-finance credibility gap. Revenue projections, particularly from the Federal Board of Revenue, are frequently overestimated, despite a history of shortfalls and regressive tax measures. Non-tax revenues including profits from the State Bank of Pakistan and petroleum levies are relied upon heavily to bridge fiscal deficits. These are volatile and policy-sensitive sources, yet they are often treated as stable pillars of revenue planning.

Second, the MTFF lacks meaningful integration with debt sustainability analysis, pension liabilities and contingent liabilities of state-owned enterprises. Provincial transfers under the National Finance Commission Award are projected optimistically, without incorporating downside risks or alternative scenarios.

The framework remains input-driven rather than outcome-oriented. It speaks of allocations but not of outcomes. It forecasts spending but not performance. It sets aggregates but rarely enforces multi-year expenditure ceilings.

Provincial MTFFs reflect another weakness: structural dependence. Own-source revenues remain limited and projections rely heavily on federal transfers. Fiscal autonomy, therefore, remains more notional than practical.

Perhaps the most glaring omission in Pakistan’s budget formulation is the absence of rigorous gap analysis. A systematic evaluation of over-expenditure and under-expenditure before designing the next budget is often missing. There is no assessment of absorption capacity, efficiency losses or delayed releases. Instead, allocations often follow a rule-of-thumb increment - 9 to 13 percent adjustments - without analytical justification. Numbers are adjusted because they must change, not because some evidence suggests that.

Pakistan needs credible fiscal thinking. Until the system prioritises evidence over convenience, projections over realism and increments over introspection, fiscal policy will remain an exercise in managing figures rather than managing the future.

When fiscal policy becomes an exercise in adjusting spreadsheets rather than interrogating realities, the process loses credibility. As the saying goes, incomplete investigation may declare someone guilty without a crime; similarly, data can be forced to confess what policymakers want it to say.

If fiscal policy is to regain seriousness, reforms must begin before the budget strategy paper is drafted.

First, institutionalise pre-budget gap analysis. Each ministry and province should conduct structured variance analysis identifying where and why spending exceeded or fell short of allocations. This diagnostic phase must inform the MTFF, not follow it.

Second, align allocations with measurable indicators. Budgeting for health, for example, should not be limited to salary and procurement projections. It should be linked to service delivery indicators like hospital utilisation rates, disease burden trends, cost per patient, staffing ratios and infrastructure performance. Without indicator-based budgeting, spending remains disconnected from outcomes.

Third, scenario-based fiscal planning must become mandatory. As discussions on the next NFC Award continue, both federal and provincial governments should prepare multiple resource allocation scenarios: one assuming successful negotiations and revised shares, and another based on the status quo. Census results, demographic pressures and governance shifts must be factored into formula-based simulations. Optimism is not a strategy; contingency planning is.

Ultimately, fiscal policy formulation must move from arithmetic to analysis. Numbers should be the result of thinking not a substitute for it. Exploratory data analysis, macro-risk assessment, performance bench-marking and transparent assumptions should anchor every medium-term framework.

Pakistan does not merely need bigger budgets and higher revenues. It also needs credible fiscal thinking. Until the system prioritises evidence over convenience, projections over realism and increments over introspection, fiscal policy will remain an exercise in managing figures rather than managing the future.

The question is not whether we can produce numbers. The question is whether we are willing to think beyond those.

The writer is an independent economic consultant