ISLAMABAD (08 June 2026): Pakistan’s fiscal framework remains heavily focused on managing recurring crises rather than reducing the underlying vulnerabilities that continue to deepen poverty, inequality and climate risks, said experts belonging to Sustainable Development Policy Institute (SDPI) while presenting a set of pre-budget recommendations here on Monday.
Amid the government’s efforts to unveil the federal budget for 2026-27, they called for a decisive shift in fiscal priorities, urging policymakers to move beyond short-term stabilization measures and place human development, climate resilience and productive investment at the centre of economic planning.”Pakistan is not only facing a fiscal challenge, but also a resilience challenge,” said SDPI Deputy Executive Director (Policy), Dr Shafqat Munir Ahmad. He called upon the government to protect and increase allocations for education, health, nutrition and social protection, while significantly expanding investments in climate adaptation and disaster preparedness.
“The country cannot continue financing recovery after every flood, drought and heatwave while underinvesting in prevention, preparedness, anticipatory action and human development,” he said, adding that the budget should be judged not only by fiscal numbers but also by its ability to reduce poverty, strengthen resilience and safeguard development gains.Dr Shafqat also called for greater public investment in employment-generating sectors, particularly agriculture, small and medium enterprises (SMEs) and emerging green economic opportunities.
Social spending, he said, should be viewed as an investment in national productivity and economic competitiveness rather than a fiscal burden.On taxation, SDPI Deputy Executive Director (Research), Dr Sajid Amin Javed warned against further increase in the burden on salaried and documented taxpayers. He noted that a large share of direct taxes continues to come from formally employed individuals while significant segments of the economy remain outside the tax net.
Dr Javed suggested that budgetary reforms should focus on broadening the tax base and improving productivity rather than relying on revenue measures that disproportionately affect middle-income households.He also supported ongoing tariff rationalization efforts, arguing that reducing tariff distortions could improve industrial competitiveness, attract investment and support export-led growth. “Pakistan needs structural reforms instead of annual revenue-driven adjustments,” he maintained, stressing that excessive reliance on indirect taxation ultimately weakens purchasing power and constrains economic activity.SDPI Research Fellow Dr Khalid Waleed argued that the budget should serve as a roadmap for economic transformation rather than a mechanism for balancing accounts.
“A budget is not meant to be a calculator with a flag on it; it is meant to be a development strategy expressed in rupees,” he said.Dr Waleed urged policymakers to ensure that fiscal decisions support job creation, productive investment and human capital development. While welcoming climate budget tagging, he cautioned that the exercise should not become a procedural requirement divorced from actual spending decisions.”Climate budget tagging must be inclusive, not just a box-ticking activity,” he said, calling for climate risks to be integrated into fiscal planning, development spending and public investment decisions.
He advocated stronger incentives for renewable energy and warned against policy inconsistencies that could discourage investment in the clean energy sector.Zainab Naeem, Head of Ecological Sustainability and Circular Economy at SDPI, proposed earmarking at least 50 per cent of revenues generated through the Climate Support Levy and 20pc of Carbon Levy proceeds for a dedicated Climate Fund. Such a fund, she said, should finance climate adaptation, mitigation, disaster preparedness and urban resilience initiatives.
She also called for targeted fiscal incentives for recycling industries, noting that Pakistan generates nearly 50 million tons of waste annually. Treating waste as an economic resource through supportive fiscal policies, she argued, could create green jobs, stimulate investment and contribute to export growth. She suggested mandatory climate-risk screening for all Public Sector Development Programme projects exceeding Rs7.5 billion before public funds are allocated. The proposal aligns with climate budget-tagging reforms and commitments under the IMF’s Resilience and Sustainability Facility, she added.
