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Business Recorder
09-07-2025
- Business
- Business Recorder
Pakistan's debt quagmire, IMF dependence, and Budget FY2025-26
With a total public debt of over PKR 76 trillion (roughly $267 billion), or nearly 65% of total income (i.e., GDP), Pakistan's economy is in a crippling debt trap. Although this debt-to-GDP ratio is slightly lower than last year, it continues to strain the country's fiscal space in subtler but persistent ways. The government has been forced to repeatedly seek bailouts from the International Monetary Fund (IMF) due to the crippling constraints imposed by this debt load. This pattern has become all too familiar, as Pakistan has participated in 24 IMF programmes since 1958. Pakistan's dependence on the IMF has reached a critical juncture. The prevailing $3 billion Standby Arrangement (SBA), which was approved in 2023, carries tough stipulations that are significantly affecting the structure of Budget 2025–2026. These requirements include tax reforms, austerity measures, and the privatization of state-owned businesses. It turns out that Pakistan's debt crisis has so severely undermined its economic sovereignty that its national budget needs what amounts to external authorization, raising serious concerns about the country's ability to steer its economy. Decades of fiscal mismanagement, lax tax administration, and an unsustainable spending pattern have been the main causes of Pakistan's current predicament. The low tax-to-GDP ratio of 11 percent is due to both political resistance to taxing wealthy elites, especially those in the real estate and agricultural industries, and policy shortcomings. Meanwhile, 48% of federal revenues are currently used for debt servicing, leaving a small amount for social services or pertinent development expenditures. The circular debt in the energy sector, which has grown to PKR 5.4 trillion, is a prime example of the structural weaknesses in the economy, which include a mix of poor governance, pricing distortions, and long-standing inefficiencies that have been ignored by succeeding administrations. External shocks, such as the uncertainty surrounding US tariff policy and regional geopolitical tensions, have exacerbated these structural issues. As a result, Pakistan's economy is caught in a vicious cycle: high debt necessitates IMF support, which imposes austerity that constrains growth, which in turn makes debt repayment more difficult. However, the IMF-mandated austerity alone will not resolve Pakistan's challenges. Initiatives like URAAN Pakistan and the government's 5Es Framework (Exports, E-Pakistan, Environment, Energy, and Equity) are necessary to address the fundamental root causes of Pakistan's economic vulnerabilities. The framework aims to increase foreign exchange earnings and cut reliance on external debt by giving exports priority. Through extensive ICT integration, E-Pakistan hopes to bring about a digital transformation that promotes creativity, effectiveness, and accessibility. In order to maintain long-term ecological and economic stability, the environment component places an enormous value on climate resilience and sustainable resource use. A focus on energy seeks to guarantee clean, affordable, and dependable power to support social and industrial advancement. Last but not least, equity aims to build inclusive human capital through equal opportunity and high-quality education, establishing the groundwork for a society that is just and knowledge-based. When taken together, these pillars show the way to a Pakistan that is advanced, resilient, and forward-thinking. In order to end Pakistan's economic stagnation cycle to establish a more just and productive economy, these reforms are crucial. Pakistan must acknowledge that external imposition alone is insufficient to address these structural problems as it negotiates its financial future with the IMF. Domestic political will and societal agreement on economic reforms are essential for real change. To mitigate the effects of reforms on the impoverished, the upcoming budget offers a chance to start this challenging transition by preserving and even growing social safety nets like the Benazir Income Support Programme (20% increase compared to the previous fiscal year). Instead of continuing the consumption-driven model of the past, it should place a higher priority on investments in human capital and export-oriented industries that can produce sustainable growth. Additionally, it must commit to multi-year reform programmes with transparent accountability and benchmarks, signaling a real break from the cycle of crisis and stopgap measures. Hardly could the stakes be higher. Without significant structural changes, Pakistan runs the risk of being stuck in a crippling cycle of debt and dependency for good, losing control over its economic future. The alternative—a persistent dedication to modernization, sound governance, and fair growth—offers the possibility of both macroeconomic stability and true prosperity. Initiatives such as URAAN show that there are answers; the political will to put them into practice on a large scale has been lacking. Given the nation's current economic juncture, Budget 2025–26 should be more than just another crisis management exercise; rather, it should signal the start of Pakistan's massive economic revolution. Copyright Business Recorder, 2025
Business Recorder
26-06-2025
- Business
- Business Recorder
Executive Risk Management Forum held for SOEs, listed firms at PSX
ISLAMABAD: FAMCO Associates of Pakistan and TransVare Corporation of USA collaboratively organized an Executive Risk Management Forum for State-Owned Enterprises (SOEs) and publicly listed companies at the Pakistan Stock Exchange (PSX). Over fifty CEOs, CFOs and Directors from public and private-sector were present in the country's first-of-its-kind event that provided an opportunity to align with IMF-mandated ERM requirements on the subject and SOEs guidelines. Ahmed Chinoy, Director PSX, informed that collective losses of SOEs in Pakistan clocked at Rs 851 billion the fiscal year 2024 as the exclusive event brought together senior leaders and C-level Risk Management Executives from across Pakistan to explore the potential benefits of the digital transformation of Enterprise Risk Management (ERM) and internal control & audit by leveraging a comprehensive suite of innovative tools developed by TransVare Corporation. This transformation aims to enhance risk visibility and allowing organizations to gain real-time insights into their risk exposures, which facilitates proactive decision-making. By automating key processes, these tools streamline internal audit functions and risk assessments, thereby increasing accuracy and reducing manual efforts. Additionally, they improve compliance tracking and reporting, ensuring alignment with regulatory standards such as the SOE Governance Framework, COSO and ISO31000. The advanced analytics capabilities offered by the tools, enable organizations to analyze large datasets for identifying trends and deriving actionable insights, while fostering collaboration and communication across teams for effective risk management. Furthermore, these solutions provide scalability and flexibility, allowing organizations to adapt their risk management strategies as they grow, ultimately leading to cost efficiencies and a stronger foundation for sustainability and success in an ever-evolving business landscape. Digital transformation of ERM and internal audit session provided actionable insights on tool journey in alignment with global standards. Ahmed Chinoy emphasized the critical importance of internal audit in the context of Enterprise Risk Management – particularly among State-Owned Enterprises and listed companies. Copyright Business Recorder, 2025
Business Recorder
14-06-2025
- Business
- Business Recorder
Pakistan's vision amidst FY26 Budget
Pakistan's annual budget has traditionally been more of a routine fiscal exercise conducted every year, covering only one year, voted every year, and executed over one year, rather than a fully strategic, long-term development plan focused on sustained growth in economic and social sectors with focus on poverty reduction and being independent of IMF crutches. There were days when the Planning Commission of Pakistan was a mighty supervisory body preparing a well-researched five-year 'Development Plan with Vision' on government's commitment to education, health, infrastructure, job creation and above all poverty reduction. The annual budget in those times consistently aligned itself with the country's vision and government's commitment to public well-being. In recent times, however, the annual budget rarely aligns itself with those strategic visions. Investment in education, health, poverty reduction, infrastructure, and job creation falls short, especially under IMF-mandated austerity. The budget 2025-26 is no different from the past routine except that the incumbent Finance Minister, Muhammad Aurangzeb, in his second Budget presentation, has brought around professionalism and discipline in the otherwise chaotic fiscal and economic dynamics of the country. With political expediency, along with persistent IMF dictates, ruling the roost, this is the best the Finance Minister could have achieved. To expect something profound coming out the budget demands drastic actions on ground like cuts in government expenditure starting from the self-fixed and out of proportion financial privileges of our legislators and state functionaries, bringing the untaxed sectors like agriculture into the tax net, arresting the losses emerging out of loss-making public sector enterprises, radical reforms to achieve growth in the agricultural and industrial sector of the country. The political hierarchy is not ready for it - although all of it is doable for the good of the country and its people. The announced budget and IMF-driven conditions appear effective in restoring macroeconomic stability. However, they fall short in translating fiscal discipline into meaningful growth, poverty reduction, and sustainable economic transformation. Without deeper structural reforms, especially in growth, taxation, infrastructure, agriculture, and industrial policy these weaknesses may persist for a long time to come. Critics have widely spoken and written on taxation and tariffs' imbalances. These cosmetic taxation trade-offs benefiting one segment and depriving the other will not change the destiny of the people of the country. There are far bigger and serious issues which challenge the fiscal, economic and social sovereignty of the country. The budget, understandably, is silent on how to address them — as there are no ready answers for it. The budget has come up with a very ambitious GDP growth target of 4.2 percent growth — without presenting the mechanism to achieve it. This target seems detached from reality — the country's economy is likely to grow 2.7 percent in the fiscal year ending June 2025. The IMF expects GDP to grow by 2.6pc in FY25 and for the economy to grow 3.6 percent in FY26. With fiscal austerity over-riding stimulus, a 7 percent reduction in overall spending and cuts in capital outlay, the budget emphasises deficit reduction rather than growth-driving investments. Despite tax incentives, there is no coherent strategy to revive agriculture and large-scale manufacturing—sectors vital for employment and exports. Foreign Direct Investment (FDI) is the prime-mover of growth. The government had channeled funds into the Board of Investment (BOI) and Special Investment Facilitation Council (SIFC), but these efforts lacked a robust policy foundation. Despite modest FDI gains, analysts believe they are 'short-term, ad-hoc measures' with 'no significant increases' in investment volume. Even with tariff rationalisation, non-tariff barriers, red tape, and weak infrastructure remain major disincentives for FDI. Poverty alleviation remains a serious challenge for the country. The IMF-mandated austerity measures have led to cuts in public sector development programmes, risking deeper joblessness and poverty cycles. While the Benazir Income Support Programme (BISP) saw a 20 percent funding boost to Rs 7.16 billion, this remains limited in addressing deep-rooted poverty. Nearly 45 percent of the population still lives below the poverty line, with extreme poverty at 16.5 percent. Low or negative growth in agriculture, industry, and services, combined with 2 percent population growth, means stagnant real wages, pushing an estimated 1.9?million people into poverty. There are perpetual tax system inefficiencies. Only ~1.3 percent of Pakistanis pay income tax and the tax-to-GDP ratio remains just ~10 percent. Reliance on withholding taxes is regressive, disproportionately burdening the poor and limiting redistributive potential. The debt servicing pressures remains a threat to country's sovereignty. High interest payments and fiscal guarantees to state-owned enterprises continue to constrain fiscal flexibility and reduce room for investment in growth sectors. The foremost challenges are political instability, weak institutional capacity and debt burden, where interest payments consume a large share of the budget (~50 percent+), crowding out development needs. In times to come Pakistan's annual budget is likely to be a short-term, reactive document rather than a long-term strategic tool for development. It shall remain heavily influenced by IMF programmes, with limited fiscal space and political will to prioritize inclusive growth and poverty reduction independently. If Pakistan is to transition toward a strategic budgeting model, it would need fiscal discipline beyond IMF pressure, reforms in tax collection and expenditure management, stronger institutions for long-term planning and above all political consensus and will to deliver on development priorities. Copyright Business Recorder, 2025
Business Recorder
13-06-2025
- Business
- Business Recorder
Budget: LCCI urges govt to address concerns ahead of NA debate
LAHORE: The Lahore Chamber of Commerce and Industry (LCCI) has urged the government to ensure immediate consultations with the business community to address concerns before the National Assembly finalizes the Federal Budget 2025-26 where it would be presented for debate. LCCI President Mian Abuzar Shad, Senior Vice President Engineer Khalid Usman and Vice President Shahid Nazir Chaudhry in a statement called for urgent revisions. They said the government had projected GDP growth at 4.2 percent, up from the current 2.7 percent. They said the budget overlooks systemic flaws. 'The growth estimates ignore ground realities, high cost of doing business, energy shortages and inconsistent policies which are affecting industrial output. The government must revisit these projections to avoid fiscal shortfalls later.' The LCCI office-bearers said the debt servicing still consumed a significant portion of the budget. Mian Abuzar Shad said that IMF-mandated subsidy cuts which would hurt low-income groups. They added that the imposition of an 18 percent sales tax on imported solar panels has also drawn sharp criticism. They said that this move contradicts Pakistan's renewable energy goals, adding 'instead of taxing solar imports, the government should incentivize local manufacturing and R&D to reduce dependence on foreign products.' Mian Abuzar Shad said that below the mark allocations would affect health, education and infrastructure. They said that slashing social sector funding for short-term fiscal adjustments will harm long-term growth. The government must rebalance allocations to prioritize human development. The LCCI office-bearers said the business community was not satisfied on taxation measures at all and there was a dire need of revisiting these with the consultation of stakeholders. They said the growth and tax targets should be revised realistically, focusing on expanding the tax net rather than overburdening existing taxpayers. They demanded of the government to prioritize the construction of new water reservoirs and the modernization of existing infrastructure to address Pakistan's worsening water crisis. With agriculture contributing nearly 24 percent of GDP and employing over 37 percent of the labour force sustainable water management is essential for economic stability. They said the work on Diamer-Bhasha Dam and other pending projects must be fast-tracked to enhance water storage capacity. They also suggested that the Public-private partnerships (PPP) should be encouraged to secure funding and expertise. LCCI President Mian Abuzar Shad said the funds should be allocated for rainwater harvesting in arid zones to reduce reliance on groundwater, adding the industries should be incentivize to adopt water recycling plants. LCCI President warned that without urgent action, Pakistan could face severe water shortages by 2030, crippling agriculture and industry. He said 'we need immediate investments in reservoirs, or our economy will suffer irreversible damage.' The LCCI office-bearers said the funds for health and education should be increased to ensure sustainable development. They said the government should formulate a clear solar policy with consistent subsidies, net-metering rules, and support for local manufacturing. The LCCI President urged the government to engage in immediate dialogue with stakeholders to address those concerns. He said the budget in its current form would risk stifling economic recovery. 'We hope the government will act on our recommendations before it's too late,' he added. He said that as the National Assembly prepares to debate the budget, policymakers must incorporate feedback from the business community to ensure a balanced and growth-oriented fiscal plan. Meanwhile, Sardar Usman Ghani, Central Chairman of Pakistan Hardware Merchants Association, while rejecting the decision to impose 18 percent tax on imported solar panels in the current budget, has warned that the move would cause irreparable damage to the process of generating cheap and clean electricity. He said it was incomprehensible that the Minister of Finance had given that explanation to protect the local solar panel manufacturing industry, firstly the solar panel industry was almost non-existent in Pakistan and secondly, that move would significantly increase the prices of solar panels. The protection to industry at the cost of public is not a step towards right direction. Public representatives in the government and opposition parties do not allow it to be approved in the budget. Copyright Business Recorder, 2025
Express Tribune
13-06-2025
- Business
- Express Tribune
Traders seek urgent consultation
Listen to article The Lahore Chamber of Commerce and Industry (LCCI) has urged the government to ensure immediate consultations with the business community to address their concerns before the National Assembly finalises the federal budget for 2025-26. LCCI President Mian Abuzar Shad, Senior Vice President Engineer Khalid Usman and Vice President Shahid Nazir Chaudhry in a statement called for urgent revisions. They said that the government has projected GDP growth at 4.2%, up from the current 2.7%, adding that the budget overlooks systemic flaws. The growth estimates ignore ground realities, high cost of doing business, energy shortages and inconsistent policies which are affecting industrial output. "The government must revisit these projections to avoid fiscal shortfalls later." The LCCI office-bearers said that debt servicing still consumes a significant portion of the budget and the IMF-mandated subsidy cuts will hurt low-income groups. The imposition of 18% sales tax on imported solar panels has also drawn sharp criticism. They said that this move contradicts Pakistan's renewable energy goals. Instead of taxing solar imports, the government should incentivise local manufacturing and R&D activity to reduce dependence on foreign products. Mian Abuzar Shad said that below-the-mark allocations would affect healthcare, education and infrastructure. Apart from that, slashing social sector funding for short-term fiscal adjustments will harm long-term growth. "The government must rebalance allocations to prioritise human development."
