akistan needs to change the way it prepares its annual budget. We have tried for too long to please the elite. It is time now to present a budget with a human face.

Today, Pakistan is at yet another fiscal crossroads as the government prepares to unveil the 2026-27 federal budget, negotiations with the International Monetary Fund, last-minute revenue target adjustments and the quiet insertion of conditions to unlock the next tranche of funding. Behind this routine lies a deep crisis. It is no longer just economic, but social and institutional as well. The people of Pakistan are under sustained financial stress; their patience is wearing thin.

For several years now, fiscal policy has been reactive rather than strategic. Governments have focused on firefighting—stabilising foreign exchange reserves, managing inflation spikes and meeting external obligations—without building a durable fiscal architecture. This budget presents an opportunity to break that cycle. It demands not cosmetic adjustments, but structural correction. At the heart of the problem lies a simple but uncomfortable truth: the state is living beyond its means, not because it lacks resources, but because it refuses to discipline its expenditure.

The illusion of austerity

Austerity has become a fashionable term in Pakistan’s policy discourse, driven largely by IMF prescriptions. Yet, what passes for austerity is often selective and inequitable. It disproportionately burdens the salaried class and the documented sector while leaving entrenched privileges largely untouched.

If austerity is to mean anything, it must begin at the top. Consider the entrenched culture of ‘official’ visits. Government leaders routinely travel to their constituencies over weekends. Many of these trips are designated official engagements. The bureaucracy and some segments of the judiciary, too, act similarly. These visits, typically spanning two to three days, use state-funded logistics—security convoys, official residences, transport fleets and administrative support. The financial drain is enormous. The main issue here is the normalisation of entitlement.

Now that digital governance is not just feasible but necessary, this model is indefensible. Routine administrative work, constituency engagement and grievance redress can be managed through virtual platforms. The insistence on physical presence—at public expense—reflects inertia, not necessity.

Pakistan’s fiscal crisis is not merely about revenue shortages; it is more about expenditure distortion and the politics of privilege. A significant portion of public spending is absorbed by perks, privileges and inefficiencies that have little to do with governance outcomes. Ideally, the upcoming budget must confront this reality head-on.

First, a drastic rationalisation of perks is overdue. A 75 percent reduction in non-essential allowances—covering housing, transport, utilities and discretionary funds—can not only generate substantial savings but also send a powerful signal of solidarity in sacrifice. Such measures are not unprecedented; governments facing fiscal stress have implemented similar cuts to restore credibility.

Second, excessive protocol must be dismantled. The spectacle of long convoys accompanying public officials is not just wasteful; it is symbolically corrosive. Limiting ministerial protocol to a maximum of four vehicles—and eliminating it altogether for bureaucrats—can align practice with principle. Public office should not be a licence for ostentation.

Third, utility subsidies for the elite must be revisited. Power allowances, often justified on administrative grounds, have become a hidden subsidy for those least in need. A 60 percent reduction in such allowances will be a step toward rational pricing and fiscal discipline.

Perhaps the most distortive element of Pakistan’s fiscal system is the proliferation of exemptions. Over time, successive governments have carved out tax-free spaces for various sectors, organisations and interest groups. The result is a narrow tax base that places disproportionate pressure on compliant taxpayers.

Entities operating under the banner of public good—such as voluntary non-governmental organisations—must not be beyond scrutiny. In most developed economies, NGOs are subject to rigorous financial reporting and, in many cases, taxes on certain activities. Pakistan cannot afford a parallel economy exempt from taxation and accountability.

The principle is simple: income is income, regardless of its source. Any exemptions should be targeted, transparent and subject to review—not permanent entitlements. Eliminating broad exemptions will not only enhance revenue but also restore fairness. Fiscal responsibility is a collective obligation, not a selective burden.

The state must protect development and prioritise people. While expenditure cuts are essential, they must not come at the cost of development. Pakistan has historically treated its development budget as a residual—something to be trimmed when fiscal pressure mounst. This approach is short-sighted.

The Public Sector Development Program must be legally protected to ensure continuity and predictability. Infrastructure, energy, water management and industrial development are not optional expenditures; they are investments in future growth.

At the same time, the composition of spending must shift decisively toward the social sector. Health and education have long been underfunded. The consequences are now visible in poor human development indicators. Redirecting savings from administrative cuts toward these sectors will yield long-term dividends—higher productivity, better employment outcomes and social stability. This is not merely a moral argument; it is an economic one. Countries that invest in human capital are better positioned to sustain growth and absorb shocks.

Ultimately, the effectiveness of any budget depends on governance. Pakistan’s fiscal challenges are deeply related to issues of institutional capacity, accountability and political will. The reliance on external financing—whether from the IMF or bilateral partners—reflects a failure to mobilize domestic resources and manage them efficiently. Each IMF programme buys us time, but does not solve the underlying problem. That requires internal reform.

Transparency must be at the core of fiscal management. Citizens have a right to know how their taxes are being spent. Public officials must be held accountable for outcomes. Digitalisation offers a powerful tool in this regard—enabling real-time tracking of expenditures, reducing leakage and improving service delivery.

Policy coherence is critical. Economic ministries must work in coordination, aligning fiscal, monetary and industrial policies toward common objectives. Fragmentation and ad hoc decision-making have been costly luxuries that Pakistan can no longer afford.

The 2026-27 budget must be more than a financial statement; it should be an indicator of intent. Will the government continue with incremental adjustments, or will it undertake the difficult reforms needed to restore fiscal health?

The path forward is not easy. Cutting privileges will be resisted. There will be a pushback against the expansion of the tax net. Re-allocating resources will require tough choices. But the alternative—continued drift—is far more costly. Pakistan does not lack ideas or expertise. What it lacks is the resolve to act.

If this budget can signal a genuine shift—toward discipline, fairness and investment in people—it may begin to rebuild trust between the state and its citizens. If not, it will be remembered as another missed opportunity.

The writer is a senior economic reporter at The News