Business leaders criticise federal budget, call for structural economic reforms

KARACHI: Leaders of the Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday expressed serious concerns over the fiscal measures announced in the Federal Budget 2026-27, describing them as inadequate to address the challenges facing Pakistan’s economy, industry and trade.

The concerns were voiced during an interactive session titled “Federal Budget and Its Implications for Pakistan’s Economy,” held at a local hotel and attended by a large number of businesspersons representing diverse sectors of the economy.

The principal speakers included former FPCCI Presidents Zakaria Usman and Mian Nasser Hyatt Maggo, former FPCCI Vice President Shariq Vohra, former FPCCI Vice President and Head of BMP’s Think Tank, Engr M A Jabbar and Sheikh Sultan Rehman.

The speakers emphasized that the business community was not seeking special favours but was advocating policies necessary for the survival and growth of industry and commerce through a competitive business environment and consistent medium-term economic planning.

They highlighted the need to eliminate tax distortions, address sector-specific and region-specific disparities, and ensure a level playing field for all businesses. The participants also stressed the urgent need to curb smuggling, both across borders and within the domestic market, which they said was undermining legitimate businesses and industrial growth.

The business leaders called for the withdrawal of blanket tax concessions and tax expenditures granted to imported products, particularly in sectors where local manufacturing capacity already exists. They argued that import substitution policies supported by a fair taxation regime could significantly reduce Pakistan’s widening trade deficit.

According to the speakers, remittances have nearly reached the country’s export earnings while imports have become almost double the value of exports, reflecting an unsustainable economic model that offers little hope for stronger economic growth, employment generation or inflation control.

They observed that the current budget largely focuses on numerical adjustments rather than introducing meaningful reforms to stimulate investment and productivity.

Criticising the government’s plan to generate an additional Rs650 billion through enforcement measures, the speakers warned that such an approach could increase pressure and harassment on existing taxpayers.

They also expressed reservations on the proposed creation of a Director General Compliance post within the Federal Board of Revenue (FBR), fearing that the new office could lead to a notice-driven tax collection regime.

”This approach appears contrary to the government’s stated objective of digitalising the tax system and reducing human interaction in revenue collection,” one speaker remarked.

The participants noted that the budget lacked measures aimed at reducing the cost of doing business or creating a more attractive environment for domestic and foreign investment. They also argued that recent budget consultations appeared to focus more on political debates surrounding the 18th Constitutional Amendment and adjustments in the National Finance Commission (NFC) award rather than on economic development priorities.

The speakers regretted that development allocations announced in the budget were insufficient to generate a meaningful economic impact or improve living conditions for the estimated 120 million Pakistanis living below the poverty line.

The participants also urged policymakers to capitalize on emerging geopolitical opportunities, particularly in light of the easing of tensions in the Middle East, which they believed could create new avenues for regional trade and economic cooperation.

Expressing concern over the banking sector’s role in the economy, the business leaders said commercial banks had become heavily reliant on lending to the government for deficit financing instead of supporting productive sectors through private-sector credit.

They noted that a significant share of Pakistan’s banking sector is foreign-owned, resulting in substantial profit repatriation despite the country’s low levels of Foreign Direct Investment (FDI).

According to the speakers, commercial banks have effectively transformed into investment institutions that earn risk-free returns by parking depositors’ funds in government securities.

They claimed that while the banking sector earned profits of approximately Rs1.74 trillion in 2025, its contribution to industrial development and economic expansion remained limited.

The participants further argued that the existing tax system encourages discretionary practices and potential collusion. They advocated the introduction of a simplified taxation structure based on fixed, single-stage and low-rate taxes, which they said could broaden the tax base and improve revenue collection. They maintained that such proposals had repeatedly been submitted to the government but were ignored by Federal Board of Revenue authorities, which they alleged preferred maintaining discretionary powers.

The business leaders lamented that meaningful consultations between policymakers and the private sector, once a key component of budget preparation were skipped by the government in recent years. As a result, they said, many business stakeholders had become increasingly pessimistic about the impact of their budgetary recommendations.

The speakers also criticised the transfer of the Directorate General Tax Policy Unit to the Revenue Division, arguing that the move had undermined the original purpose of establishing an independent body to conduct objective economic analysis and formulate tax policy recommendations. They contended that tax policymaking had become subordinate to revenue collection objectives, often overlooking the broader requirements of economic stability, industrial growth and poverty reduction.

Concluding the session, the participants stressed that trade and industry play a critical role in generating employment, controlling inflation, reducing poverty and promoting sustainable economic growth. They called upon the government to engage more closely with the business community and adopt long-term policies aimed at strengthening Pakistan’s productivity.

Copyright Business Recorder, 2026