Notes on key budgetary reforms

We can characterise the FY26 budget as well-intentioned fiscal austerity, but overall, it does little to expand the tax base and isn’t very plausible (4.2 per cent GDP growth with full austerity is an extreme goal). It imposes fiscal responsibility on the provinces and targets a consolidated fiscal deficit of 3.9pc of GDP, which is more ambitious than even the International Monetary Fund. While there is some relief for the salaried class, enhanced general sales tax and fuel levies will further squeeze purchasing power, which means FY26 could see more Pakistanis fall below the poverty line. Not surprisingly, therefore, the budget has been poorly received by analysts, who have characterised it as elitist and insensitive. However, we disagree that the budget is regressive as it penalises digital platforms.