This response is tongue in cheek. This response is not uncommon. This response makes a mockery of the most publicly current vow of empowerment that most managers profess. It is definitely the talk of the seminars. It is definitely the part of the corporate speak. It is definitely the need of the hour. Despite such rhetorical popularity, in practice it still has a minority status. This is a factual situation. One of the biggest indicators is that the empowerment - real or rhetorical - is the level of engagement. The level of employee engagement is presently record low. Gallup’s 2026 State of the Global Workplace report tells an alarming story: global employee engagement has slid to 20% — the lowest percentage since 2020.

Empowerment lies at the heart of engagement. When I asked an employee, who was working in a good organisation and earning healthy compensation, why he wanted to leave, he replied, “My manager has just hired us to do cheerleading. We have no say in most matters.” This is a feeling that is echoing in most work chambers. The most common type of leader is the one who feels since he is a leader, he needs to take all the decisions. Many employees talk about the classic micromanager who does not trust his team. He does not delegate. He does not empower. He does not develop. In today’s complex world, with pressures to achieve more and more, most leaders do not have the time and patience to develop teams. That is why teams become average. That is why teams become disheartened. That is why teams become disengaged. That is why seemingly well performing companies start tumbling down.

There are two problems with empowerment. Firstly, the leader is insecure and is afraid of sharing different powers, i.e., delegation power, knowledge power, authority power. Secondly, the leader wants to empower but does not have the right structure and system to do it. The first one is, of course, much more dangerous. The second one is more correctable. The two best ways to mess up empowerment are when you do:

A. Empowerment without accountability: Empowerment is NOT abandonment. Many leaders feel great about assigning work to employees and then not really keeping track. The excuse they have is that they do not want to be a micro-manager. They want to allow the employee freedom etc. All very noble. However, sometimes this makes the employee feel scared. Sometimes the lack of followup may result in a huge mistake that may then become a red mark on the employee’s career. That is why some mutually agreed upon feedback meetings are a must to ensure the employee gets the guidance and support he or she requires.

B. Empowerment without development: The other mistake is the mismatch. Delegating without doing the 3As assessment, i.e., Ability, Authority, Accomplishment record. Has the employee been trained to do this project? Have they got the relevant experience? Have they been given the authority to make key decisions? If the leader has not taught them to swim in deep waters and sends them to the sea, it will be a guaranteed drowning.

Once these structural and systemic processes are streamlined, the leaders need to know the elements that create real empowerment.

Empowerment element 1: Clarify and involve –Assignments given without clarifying the what and why are just meaningless tasks. People will do them without passion. Empower means making people excited about the assignment. That requires a purpose clarification conversation. When giving an assignment do not just hand over. First discuss the purpose, the importance. Then explain the contribution the employee can make in this role. Then ask them what they think should be done. Let them ask. Let them debate. Let them argue. The more the discussion, the more the clarity. Let them challenge areas of difficulty. There may be a negotiation on the deadlines. This brings buy-in.

Empowerment Element 2-Ask and enable – While the micromanager tells it all, the empowering manager asks the employee their opinion. The micromanager instructs, microsupervises and pushes. The empowering leader asks, develops mutually agreed timelines and checks and lets the employee decide their own way of doing within discussed boundaries. The leader, however, ensures that the employee is properly trained and equipped to deal with the assignment. If the assignment requires experience and skills, the leader ensures only people with experience are chosen. They are sent on various courses and market studies to provide skills. Once the ability matches the opportunity the delegation process ensues.

Empowerment Element 3-Track and give Feedback –Empowerment is not a “give and forget” exercise. It is “do and review” in a decent, mutually agreed upon timeline exercise. Feedback is almost like a corporate swear word. Review meeting may be a more acceptable word. This meeting is done by the employee to show work, status, issues and suggested solutions. The leader must highlight the de-trackers in terms of planned vs. achieved variances. A retracking strategy needs to be formed with clear and measurable goals and timelines. This process needs to be documented and shared with relevant people to ensure it is part of a system. If they are making mistakes, do not jump in to take over.  Instead speed up the training and enabling process.

Empowerment Element 4-Recognise and appreciate: This is the most important element to make empowerment an exciting experience. being part or being apart Despite it being free of financial burden, appreciation is used very stingily by most leaders. Empowering means appreciating them for every milestone they achieve. In the weekly session for tracking progress, leaders should look out for work well done. Appreciate on the spot. Celebrate in the team. Recognise by giving some award on a company function. Let the employee feel they are valued and their effort has made a difference.

Empowering is not a free for all process. Empowering is not about macro management. Empowering is a meaningful transfer of skills, responsibility and support. Empowering means trusting people. Empowering means inclusion. Empowering means involvement. Empowering means letting people do work that stretches them. Empowering means encouraging them. Empowering means appreciating them and celebrating their progress. Leadership, in essence, is not about how much power you have but how many others you have empowered to unleash their potential.

In Pakistan, there is a sharp rise in gender-based violence for the last many years, as the cases reported in 2021 jumped from 30,757 to 61,997 in 2024. Women, children, especially the minor girls, and vulnerable groups are the main victims. These crimes not only hurt the people at individual level but also at community level. Under-reporting, deep-rooted norms, weak laws, and poor enforcement allow perpetrators to escape justice, for which both the victims and the community pay the price.

The World Economic Forum’s Global Gender Gap Report 2025 ranked Pakistan last, at 148th on the Global Gender Gap Index, below Sudan (147th), Chad (146th), Iran (145th), Guinea (144th), Democratic Republic of the Congo (143rd), Niger (142nd), Algeria (141st), and Mali (140th), with 56.7% gender parity that links toward gender inequalities, where public spaces remain challenging and violence against women and girls is common.

According to the WHO 2023 report, 50% increase in sexual violence is linked to inequality, conflict, and economic hardship. In recent years, nearly 1 in 3 women, or about 840 million worldwide, experience physical or sexual abuse by an intimate partner (32%) or non-partner (8%) in their lifetime. However, it varies between regions and countries. For instance, the highest ratio is in Oceania at 37%, followed by Sub-Saharan Africa and South Asia at 32% and 31%, respectively. The South Asia region faces higher risks of experiencing sexual violence, with 1 in 4 girls (26.8%) and 1 in 6 boys (15.5%).

In Pakistan, in just two weeks, the media has reported various incidents in June, like the killing of an 18-year-old girl, Amna Sehar, allegedly by her family in the name of honour at Odha village in Kakrali, Gujrat district, the murder of a woman by her 64-year-old husband, Ali Akbar, for refusing marital relations in Orangi Town, Karachi on June 3.

In some other incidents, a lift operator threw acid on a young Lady Doctor, Mahnoor Nasir, while she was on duty at the Civil Hospital/Sandeman Provincial Hospital in Quetta on June 5.  A 17-year-old student, Mishal Fatima, died at DHQ Hospital, Jhang, after being allegedly kidnapped four days earlier, on June 7. Another incident relates to a 7-year-old girl, Muntaha Zahra, who was abused and murdered in Sargodha on June 22. An 8-year-old boy, Shakeel Saleem, was subjected to sexual assault and murdered in Sarli in Thikriwala area of Faisalabad on June 24. A ruthless incident happened with a 3-year-old girl, Kulsoom Qasim, who was raped and brutally murdered in Quaidabad, Karachi, on June 25.

The CCTV videos and news reports about shocking incidents of child abuse and gender-based violence (GBV) were circulated from across the country. Each clip and news trend lasts for 48 hours, then disappears. The same pattern repeats, which means our outrage is faster than our systems. These atrocious incidents spark fear and anxiety among people, emphasising the risk to children’s safety, disrespect, and social disparities that women, girls, boys, and vulnerable groups face in Pakistan. On the other hand, these incidents threaten an individual’s freedom, trust, confidence, and independence, particularly for vulnerable groups across the country.

These incidents exposed an alarming trend of violence emerging as the most widely reported issue in our society. According to the Sahil Report 2025, child abuse cases rose by 8% alongside 34% rise in GBV cases nationwide. The reported data further classify cases as follows: 1,546 murders, 1,345 abductions, and 1,169 cases of torture. For instance, 14.6% of girls and 19.5% of boys experienced sexual violence, and more than 9 children experienced abuse daily. Other figures include 877 rape cases, 680 suicides, 449 injuries, 316 cases of harassment, 41 acid attacks, and 248 cases of honour killings.

Such heinous crimes are not isolated incidents, but a segment of a wider pattern perceived and learned as “acceptable” or “private” that often begins at home with gender norms shaped by the daily practices we normalise. Studies indicate that harmful gender norms shape both family culture and society. Even the interpretation of values, attitudes, behaviours, and family customs develop a standard. The data revealed that 32% of abusers in GBV cases were acquaintances, 18% were strangers, and 12% were husbands, while in 20% cases, the abuser was not mentioned. That’s a reminder of the significant role of parenting, daily-life practices, and community vigilance.

UNICEF’s study analysis shows that early education on body safety and boundaries reduces risk, but in Pakistan, cultural norms around care and affection for children by acquaintances often compromise the natural sense or ability to differentiate good and bad touch, making it difficult to implement. This starts at a very young age, so children often do not understand personal boundaries. Teaching these emotions later can make children feel scared or insecure, and their silence about private matters reduces their ability to make decisions and report unsafe situations. Similarly, a lack of adult supervision and the norm of “community parenting”, where neighbours and relatives are trusted to care for children, can increase risk and vulnerability when those boundaries are not discussed openly.

The Constitution of Pakistan provides several safeguards for women’s rights and legislation to protect women and vulnerable groups from domestic abuse. Article 14 guarantees the Dignity of the Person as a fundamental right, while Article 25 ensures equality before the law.

In line with constitutional obligations, the legislation though exists in all the four provinces, yet implementation is the issue. In Sindh, the Domestic Violence (Prevention and Protection) Act was passed in 2013, the Balochistan Domestic Violence (Prevention and Protection) Act was passed in 2014, the Punjab Protection of Women Against Violence Act was passed in 2016, and the Khyber Pakhtunkhwa Domestic Violence Against Women (Prevention and Protection) Act was passed in January 2021. It criminalises domestic violence and talks about giving monetary relief, protection orders, residence orders, and custody orders for children. At the federal level, there exists the Domestic Violence (Prevention and Protection) Act 2026, which is only for the Islamabad Capital Territory. Earlier, parliament passed the Domestic Violence (Prevention and Protection) Bill 2025, which aims to protect vulnerable individuals (including children) from domestic abuse and provides relief and rehabilitation services.

However, the Punjab Protection of Women Against Violence Act, 2016, is unique in many ways because it does not criminalise domestic violence, and the structure is not developed as defined in the law. For instance, a protection officer, a courtroom, a court, or a women’s protection committee, to whom a woman can approach the court directly. The Act is notified only in Multan because the Violence Against Women’s Center is located there. Similarly, some other laws, including the Protection Against Harassment of Women at the Workplace Act 2010, the Criminal Law Amendment Acts of 2006 and 2016, and the Anti-Rape (Investigation and Trial) Act 2021, provide a strong legal framework.

Pakistan has sufficient strong laws to protect children, such as Zainab Alert Act 2020, Anti-Rape Act 2021, Provincial Child Protection Acts, and the Prevention of Electronic Crimes Act (PECA) 2016, which criminalises online abuse like child pornography, blackmail, cyberstalking, and sharing private images. The main problem is implementation since child courts, child protection units, and commissions are not fully established. For example, KP was supposed to set up 34 child protection courts, but so far it has only 8. However, without effective enforcement and support systems, these protections often fail to translate into real safety and justice for the victims.

Despite having a strong legal framework, commitments to Sustainable Development Goals, and being part of several international conventions and treaties, Pakistan is faced with the growing challenge of domestic violence because of its failure to implement these laws. Implementation remains a central challenge due to structural gaps, financial and societal barriers, and regressive mindsets faced by survivors. However, weak enforcement and social barriers mean the state has failed to carry the full burden. Without proper resources and enforcement, these laws cannot fully protect vulnerable groups, children (girls, boys), and women unless we address multiple layers of traditions and gender norms.

The rising cases of domestic as well as gender-based violence, alongside child abuse cases, show that the problem often starts in everyday spaces, in markets, on streets, and even inside homes where supervision and communication are missing. We must begin at home by building trust and strong family ties, reducing communication gaps, and giving our children and adults a safe, violence-free environment where they feel valued, protected, and are heard progressively.

The real change begins with embracing alternative solutions, such as unlearning traditional life patterns and social behaviours, and relearning improved ones, and implementing them at home, in communities, and in stimulating the next generation in the shape of social obligations and customs.

In schools and colleges, the youth must be imparted education and training about respect, consent, and safety, while teachers and parents need to be sensitised to recognise warning signs in children’s and adults’ behaviours to respond to them early.

Communities need to play a radical role by challenging these rigid and harmful norms and supporting survivors so that they may not be stigmatised.

Similarly, media has a significant role in setting the agenda by supporting survivors of abuse and GBV, raising awareness, and demanding government action to ensure safety, human rights, and justice.

Law-enforcement agencies are responsible for implementing laws and policies. It is important to identify the gap between law-enforcement agencies and the court system. Both are the components of our justice system, but they lack awareness about the issue.

Preventing violence and shifting attitudes over time will require collective effort by families, school managements, communities, and law-enforcement agencies because a safer society is built when every home becomes a place of protection, dignity, and care.

The CPI has, in fact, been showing a rising rate of inflation since July 2025, when it stood at 4.1 percent. By February 2026, it had approached 7.0 percent. Thereafter, the Middle East war and the disruption of oil supplies through the Strait of Hormuz have implied a big increase in the price of petroleum products globally, and in Pakistan as well. Consequently, the rate of inflation has surged globally and in Pakistan from 7 percent in February 2026 to 11.1 percent by June 2026.

The upsurge in the rate of inflation in the last quarter of 2025-26 has implied an average rate of increase in the CPI of 7.1 percent in 2025-26. This is significantly higher than the rate of inflation in 2024-25 of 4.5 percent.

The core rate of inflation, corresponding to the non-food non-energy inflation, has reached 8.7 percent in 2025-26. The trimmed rate of inflation has been even higher at 9.6 percent.

The SBP maintains a relationship between the policy interest rate and the core rate of inflation. As such, the rise in the core rate of inflation will limit the ability of the Monetary Policy Committee to bring down the policy rate in its forthcoming committee meeting.

A fundamental question is whether the significant upsurge in the rate of inflation is due solely to rising oil and gas prices after the Middle East war or are other factors in Pakistan have also contributed to the double-digit inflation?

The answer is that directly the increases in petrol and gas prices have had a very broad-based impact on the rate of inflation, due to the rise generally in transport costs and in utility bills. However, what has not been focused on is the unexpected upsurge in food prices, due primarily to the quantum jump in the price of wheat by almost 65 percent and that of wheat flour by over 55 percent.

Why has there been such a big increase in wheat prices? According to the Pakistan Economic Survey, a positive outcome was expected in 2025-26, with wheat acreage and production rising by 4.3 percent and 4.4 percent, respectively.

However, the latest estimates by the USDA of wheat crop output in Pakistan in 2026 reveal that in the case of Pakistan there has been a big drop from 31.81 million tons in 2024-25 to 28.40 million tons in 2025-26. This implies a large fall of 10.7 percent in output. It explains the quantum jump in wheat and wheat flour prices. It also appears to be consequence of a withdrawal of a policy of a minimum procurement price on wheat sales to farmers.

The Sensitive Price Index (SPI) is a key indicator of the level of cost-of-living for the low and middle income quintiles. It includes the prices of 51 basic goods and services.

The quantum jump in the prices of wheat and wheat flour has led to a higher rate of inflation in the SPI of 13.5 percent in the case of the lower two income quintiles. This compares with the inflation in the top quintile of 10.1 percent.

This implies that in the presence of rising unemployment due to relatively low GDP growth and higher rise in the cost of living of the lower income households, the majority of the population is likely to have become worse off in 2025-26. This is unfortunately the trend that has been observed in the last five years.

A comparison can be made of the rate of inflation in Pakistan with that in other South Asian countries like India and Bangladesh. In June 2026, reflecting the impact of the Middle East war, the rate of inflation in India still remained low at 4.4 percent, while it was significantly higher in Bangladesh at 9.2 percent. However, these rates are still low in comparison to the rate of inflation in Pakistan in June of 11.1 percent. A major part of the difference is likely to be big jump in the prices of food staple, wheat, etc., in Pakistan.

A useful analysis is also to determine the prices of petrol and HSD oil in the three South Asian countries. It is significant that both India and Bangladesh had a lower prices in the second quarter of 2026, after the commencement of the Middle East war, of HSD diesel oil and significantly higher price of petrol. This pricing policy is likely to be better from the viewpoint to limiting the impact on the overall price level of the quantum jump internationally of prices of crude oil and petrol prices.

There is need also to highlight that currently the average price in US dollars per kwh of electricity for industrial consumers in India is 20 percent lower and in Bangladesh it is 34 percent lower than the tariff in Pakistan. Clearly, this has placed Pakistan at a big competitive disadvantage in exports.

We come to the outlook for inflation in Pakistan in 2026-27. This is expected to remain at the same average rate of 7 percent as in 2025-26, according to the IMF and the Annual Plan. However, the resumption of the war in the Middle East and the closure once again of the Strait of Hormuz do not portend well for international oil and gas prices. Consequently, if the conflict persists in 2026-27 then there is the likelihood that the Brent crude oil price could approach or even rise above the peak price of USD 114 per barrel in 2026. This will accelerate the rate of inflation in Pakistan. As such, the rate of inflation is likely to remain double-digit in 2026-27 and even approach 15 percent.

The emphasis in the policies to manage inflation ought to be to limit the surge in food prices as happened in 2025-26, especially of wheat and wheat flour. Otherwise, the combined effect of higher oil and food prices will worsen further the living standards of the majority of households in Pakistan.

The tragedy is that there has been no respite to the people of Pakistan since the COVID-19 in 2019-20 and the floods in 2022-23 and now with the war in the Middle East. Pakistan’s efforts to bring peace in the Middle East must, however, be recognized.

Copyright Business Recorder, 2026

This fact is supported by the dynamics of our youthful population. This is generally estimated at about 65 percent being below the age of 30 years. And this segment is exposed and is dealing with technology. Obviously, this is a huge potential.

But it can go both ways. It can be a positive potential, if harnessed for achieving greater economic productivity .However, it can be a lethally negative, if they are not provided with opportunities to experiment and excel. This literally can prove to be a ticking bomb. To the lack of opportunities due to the malaise of nepotism, their silent reaction is to move overseas. It is believed only in the last couple of years we have lost to overseas opportunities almost 1.5 million professionals. The issue is governance.

The advancements in science and technology today place upon the leadership a great responsibility of how to educate the masses. The painful reality of over 25 million school-going age children remains outside the ambit of receiving schooling stares at us, glaringly.

Added to this misery is the issue of being obstinate in pursuing old syllabus and an even more antiquated methodology of teaching and training.

Fortunately for us, our Founder, Mr Jinnah, had laid down our expected governance standards in his epoch speech of 11th August, 1947, to the Constituent Assembly, with crystal clear clarity. Unfortunately, however, history records that his speech was not only truncated, but was also expunged of important constitutional matters, to serve the interest of the deviants across successive governments.

He had spelt out Pakistan’s approach to subjects like fundamental duties of the government; the accountability process in a democratic setup; the menace of corruption and the rights, privileges and duties of the common man and, above all, the subservience needs of the various state organs to the lofty democratic principles. All these were way laid for the perpetuation and preservation of vested interests. The less said the better.

Post 1947-48, our lack of focus in redefining what is good governance for us and what internationally accepted best practices are. While we are quick and adept at developing “policy standards”, we are seized by inertia when it comes to implementation. The derailment of a good policy begins with the abuse of the authority to make, “exceptions”. It becomes impossible to have any standards of governance, if the prevailing environment is driven more by exception than by rules.

The flouting of traffic signals by both the elite and not so elite is a small example of our general behaviour where breaking laws or rules is seen as a sign of power and authority.

Leadership at every level of society, economy, and political setup is more inclined to turn a blind eye to the violative behaviour. In a manner, the followers be it in the government or private sector tend to forsake good practices of better governance largely because they feel protected by the collective misdeeds of their supervisors; hence are encouraged to do their bit of misgovernance, they are strong subscribers to the adage “it is ill sitting in Rome and striving against the Pope”.

The malaise travels deep in such circumstances; in fact, to the lowest levels of the hierarchy.

Good governance is the antidote to corruption. The hydra-headed monster of corruption grows like the Banyan tree- — enveloping and shadowing all types of corruptive practices. The best format of corruption is the legalised dispensation of subsidies that are abusively used; these are not enjoyed by the masses but by the powerful elites only. In fact, the non-elite foot the bill of privileges enjoyed by the elite.

The general standards of good governance relating to government, state-owned institutions, private sector entities, coupled with data protection and integrity, are based on the fundamental principles that, inter alia, include transparency, accountability, the pre-dominance of law and legal structure; effectiveness, its efficacy and efficiency coupled with responsibility to uphold these principles.

For delivering good governance it is essential to have in place quality ‘human capital’; whether it be the government or the private sector. Our attention to develop and harness the potential youth of the country is seriously impaired by neglect and inattention. The long-term consequence of the strategy would mean we shall be governed by the less intelligent human resources.

Good governance and best practices must serve as strength for inducing local and foreign investment into the economy. These should not become tools of excuse for inaction and the perennially addictive mental blockage towards change and adoption of new rules and technology.

For good governance to prevail, we must bear in mind that ice melts from the top and the fish rots from the head. Governance has to be embraced by leadership first; only then will followers follow.

Copyright Business Recorder, 2026

Pakistan once possessed one of the most successful gas sectors in the developing world. Domestic production expanded steadily and indigenous gas powered industrial growth. Today, the sector is burdened with liabilities exceeding Rs 3.5 trillion, domestic production is declining, exploration activity has weakened and consumers face shortages despite substantial infrastructure investment.

The deterioration is not merely geological. It is largely institutional. For years, exploration and production companies were not paid on time. Receivables accumulated. Pricing signals were distorted. Contractual commitments were frequently delayed or modified. The result was predictable: investment slowed, exploration activity weakened, reserves replacement declined and domestic production suffered. Pakistan’s gas shortage is therefore not simply the result of depleted reservoirs; it is also the result of policies that discouraged the very investment needed to discover and develop new resources.

Instead of creating competitive markets capable of attracting capital, successive governments expanded administrative controls. Instead of encouraging competition, they relied on allocation. Instead of transparent pricing, they preferred cross-subsidies. Instead of rewarding efficiency, they often protected incumbents.

Consider LNG. Pakistan invested billions of dollars in LNG import infrastructure. The terminals are internationally competitive and technically successful. Yet rather than becoming gateways for competition, they have largely been confined within a centrally managed system. In most countries LNG terminals are commercial platforms where multiple suppliers compete for customers. Pakistan built the infrastructure but never allowed the market to emerge.

The same problem affects the broader gas sector. Transportation, distribution and commodity supply remain bundled together. The companies that own pipelines are also suppliers. Potential competitors face uncertainty regarding access, pricing and regulatory treatment.

The electricity sector, despite its many flaws, has at least begun moving toward competition through CTBCM. The gas sector requires precisely the same evolution. Pipelines should transport gas regardless of ownership. Suppliers should compete for customers. Consumers should be able to choose suppliers. Transportation charges should be transparent and non-discriminatory.

A major obstacle remains the persistent belief that government control is a substitute for markets. The consequences are visible in rising circular debt, high unaccounted-for-gas losses, declining exploration investment, underutilised LNG infrastructure and weakening industrial competitiveness.

The irony is that many of the shortages now cited to justify intervention were themselves created by intervention. When producers are not paid, investment falls. When prices are distorted, resources are misallocated. When contracts become uncertain, capital leaves. The resulting decline in domestic production is then used as justification for even more administrative control, creating a vicious cycle.

Pakistan’s LNG terminals should be permitted to import and sell directly to customers. Genuine third-party pipeline access should be introduced. Transportation should be separated from commodity sales. SNGPL and SSGC should ultimately evolve into network operators rather than protected merchant monopolies. Competitive balancing arrangements and market-based pricing should become the norm.

Investors do not commit capital because governments announce reforms. They commit capital when they believe those reforms will endure. Predictability matters. Contractual certainty matters. Competitive neutrality matters.

The country already possesses most of the physical infrastructure needed for a competitive gas market. What remains missing is the willingness to trust markets more than administrative controls.

Pakistan’s gas crisis is therefore not fundamentally a resource problem. It is a governance problem. Until that reality is recognised, the country will continue investing in infrastructure while neglecting the markets needed to make that infrastructure productive.

Copyright Business Recorder, 2026

During my term as Chairman of the Pakistan Science Foundation (PSF), the last hour of the day was reserved for file work. Most government decisions are still taken on the files. Implementation takes place after the signatures of the head of the department (HOD). The file travels full circle, all objections must be removed. Both the internal and external auditors must concur otherwise order is stalled. It is a very intensive, foolproof system. Any relevant person can dissent or raise an objection on the file. One day out of curiosity, I asked my Personal Secretary (PS): “With so many checks how does corruption take place?” His answer was short and simple, “When everyone joins in.” In other words, they are all accomplice to the crime. 

In a closed colonial system, there are no bystanders or eyewitnesses, only accomplices otherwise they should have courage to dissent on the file to set the course of the outcome. History is penned by the historians after the event has taken place. Those who are participants and operate in the shadows outside public view must carry the blame for the misadventures that have repeatedly taken place in the land of the pure.

Every civil servant takes an oath to defend the Constitution and to obey lawful orders. Supra-constitutional orders usually hurt national interests and should be opposed. Unfortunately, dissent carries a heavy price which no one is willing to pay; instead becoming an eyewitness is a much safer course to follow. A witness must be neutral and unbiased to be of value. Hostile or attached individuals do not qualify as eyewitness as their own interests come in the way. 

Pakistan started off well. Individuals in authority stood firm to protect national interests, but over the years they drifted. Survival has become important. Defiance is avoided to move up the ladder. Qudratullah Shahab was the Principal Secretary to Ayub Khan when he was toppled by Yayha Khan. On the very first day in office, the entire staff of the Presidency welcomed the new boss and showered him with praises. Only Shahab Sahib asked to be released from duty. He left the powerful office in grace to retire with his honor intact. His autobiography,“Shahabnamah”, is worth reading.

Those who can control the unfolding of events are obligated to act not stand as observers to later report their eyewitness accounts as bystanders. Those who can make a difference and contribute to national well-being have a sacred duty to perform. All they need is courage, resolve and love to serve the nation.

The current account has also slipped back into deficit, recording a shortfall of $649 million in June after posting a surplus of $500 million in May. These figures are not merely disappointing; they expose deep structural weaknesses that successive governments have failed to address.

Pakistan’s export sector has never suffered from a shortage of policies. Its real problem is inconsistent execution. Whenever an export strategy begins to produce results, political transitions or frequent transfers of key officials disrupt continuity. Commerce policy has too often been driven by short-term administrative thinking rather than a long-term national export strategy.

FY2026 reflects this failure. Exports declined nearly 6% to $30.13 billion, while imports increased almost 8% to $69.6 billion, widening the trade deficit by more than 21% to $39.5 billion—the highest level in four years. In June alone, exports fell to $2.24 billion while imports surged to $6.77 billion, producing a monthly trade deficit exceeding $4.5 billion. No economy can sustainably import more than twice the value of its merchandise exports without eventually facing severe external financing pressures.

The deterioration cannot be attributed solely to recent geopolitical tensions. Export performance had already weakened from the beginning of FY2026. High energy tariffs, rising taxation, expensive financing, policy uncertainty and declining competitiveness steadily eroded Pakistan’s position in international markets despite significant reductions in policy interest rates.

The most alarming setback has occurred in agriculture, historically one of Pakistan’s strongest export sectors. Only two years ago, the country achieved record agro-food exports of over $8 billion, driven by rice, sesame, maize, fruits and vegetables. Instead of consolidating those gains, exports have collapsed despite bumper harvests.

During FY2026, agro-food exports declined to just over $5 billion from more than $7.1 billion a year earlier. Rice, Pakistan’s largest agricultural export, suffered a sharp decline as artificial increases in domestic prices made Pakistani supplies uncompetitive. Rice export earnings fell by almost 32% to $2.29 billion despite ample production. Sesame seed exports also dropped by more than 32%.

Ironically, growers received little benefit. Farmers producing potatoes, cauliflower, carrots, radish and other vegetables were forced to dump or feed produce to livestock because border closures and weak export management left domestic markets oversupplied while export opportunities were lost.

Meanwhile, India continued strengthening its agricultural exports. In FY2025-26, India’s agricultural exports reached a record $52.55 billion. Rice exports alone exceeded $11.5 billion, with export volumes reaching over 21 million tonnes. Pakistan’s coarse rice exports, by contrast, fell by over 42% in value, reflecting declining competitiveness rather than declining production.

Several domestic policy distortions have contributed to this outcome. High electricity and gas tariffs, increasing taxation, costly logistics and higher withholding taxes have raised production costs. Incentive schemes such as the Drawback of Local Taxes and Levies (DLTL), instead of encouraging genuine exports, have reportedly encouraged misuse, over-invoicing and market distortions while inflating domestic prices.

Imports present an equally troubling picture. While machinery, industrial raw materials and petroleum remain essential for economic activity, Pakistan continues importing billions of dollars’ worth of edible oil, pulses and numerous manufactured consumer goods that could increasingly be produced domestically with appropriate incentives. Excessive dependence on imported consumption goods continues to place unnecessary pressure on scarce foreign exchange reserves.

Every additional dollar of imports without matching export earnings ultimately requires financing through remittances or external borrowing. Although overseas Pakistanis continue to provide record remittances, these flows cannot permanently compensate for structural weaknesses in trade. Sustainable external stability can only be achieved through higher exports and stronger domestic production.

Successive governments continue announcing ambitious export targets, yet exporters still struggle with unreliable energy supplies, inconsistent tax policies, cumbersome regulations and high production costs. Export growth cannot be achieved through committees, speeches or temporary subsidies. It requires internationally competitive industries, efficient logistics, technological upgrading and policy consistency over many years.

Pakistan’s challenge extends beyond the trade deficit itself. The country simply produces too few internationally competitive goods while consuming increasing quantities of imported products. Until productivity improves across agriculture, manufacturing and services, recurring trade deficits will remain inevitable regardless of exchange-rate adjustments or temporary import restrictions.

The solution requires a coherent long-term national strategy rather than piecemeal interventions. Agricultural competitiveness must be restored by reducing farm input costs, ensuring affordable energy and expanding investment in modern irrigation, mechanisation, climate-resilient seeds, storage, cold-chain infrastructure and food processing. Export policy should gradually shift towards engineering products, pharmaceuticals, information technology, medical devices, chemicals and other higher value-added industries while strengthening value addition in agriculture.

Import substitution should focus on products where Pakistan possesses genuine production potential, including edible oils, pulses, chemicals, machinery components and consumer goods through technology transfer, investment incentives and industrial expansion instead of protectionism.

Energy sector reforms remain equally critical. Lowering circular debt, rationalising capacity payments, renegotiating expensive power contracts and introducing competitive industrial electricity tariffs would significantly improve export competitiveness. Tax simplification, customs modernisation and digitalisation should further reduce the cost of doing business.

Export financing should increasingly support automation, artificial intelligence, robotics and advanced manufacturing instead of merely financing traditional commodity exports. Simultaneously, Pakistan must diversify export destinations by expanding market access across Africa, Central Asia, ASEAN and Latin America while renegotiating underperforming trade agreements.

Trade deficits are symptoms rather than the disease itself. The underlying problem is Pakistan’s persistent inability to produce sufficient internationally competitive goods and services. Unless productivity rises, exports diversify and industrial competitiveness improves, the country will remain trapped in recurring balance-of-payments crises, currency instability and repeated dependence on external lenders.

The FY2026 trade figures should, therefore, be viewed not simply as another disappointing statistical release but as a national warning. Pakistan cannot consume its way to prosperity. Sustainable growth will only come when production, productivity and exports become the central pillars of economic policy.

Pakistan’s data credibility in general and inflation in particular was challenged in 2024 when the International Monetary Fund (IMF), at the time of approval of the ongoing Extended Fund Facility programme, highlighted “important shortcomings (in) the source data available for sectors accounting for around a third of Gross Domestic Product, while there are issues with the granularity and reliability of the Government Finance Statistics (GFS)….the government will prioritize and address these weaknesses supported by technical assistance (TA) from the Fund on GFS and a new Producer Price Index (PPI).”

The PPI is a critical measure defined as computing the average change over time in the selling price of goods and services that are produced domestically – and the price used is determined at factory-gate and excludes transport charges and taxes. The Fund suggested further revisions in the proposed PPI methodology by the Pakistan Bureau of Statistics (PBS) to make it more credible and authentic, which led to the extension of the scheduled end of the TA from end June to October this year.

A PBS official informed Business Recorder that an upgraded PPI would enable the government to identify the role of the middleman and hoarders in the event of discrepancies or unusual increase or decrease in the cost of production and the end consumer price. He further contended that the new PPI would enable detection of the role of the middleman by monitoring trade and transport margins – given that middlemen play a very critical role in supplying farm output to the market in Pakistan. Disturbingly the official acknowledged that so far very little work, if any, has been undertaken for the agriculture sector due to the fact that subsequent to the 18th amendment agriculture is a provincial subject and the provinces’ crop reporting services lack any capacity to meet PPI requirements.

This admission implies that the weightage of 34.58 percent given to food and non-alcoholic beverages in CPI (with 29.60 percent for perishables) in calculating the CPI and the PPI calculation is likely to be revised, subject to capacity building in the provinces crop reporting services. And, disturbingly, the chokehold of aarthis (middlemen) on the food supply chain, estimated at 80 percent of the total farmed output, and on pricing, will remain unless the provinces’ crop reporting services undergo massive capacity building.

The next highest weightage is given to housing, water, electricity, gas and fuels, at 23.63 percent. Apart from housing which one would assume is perhaps less than 1.5 percentage of the total, all other items are subject to the IMF condition of ensuring full cost recovery that the State Bank of Pakistan (SBP) euphemistically refers to as “administrative measures” – defined as raising utility charges as costs rise irrespective of whether they are attributable to higher fuel costs (imports) or inefficiencies. These measures pertaining to the energy sector are geared towards reducing the circular debt that reflects appalling sectoral performance necessitating subsidies at the taxpayers’ expense and/or borrowing from the market (with 1.25 trillion rupees borrowed this year whose interest payments were to be passed onto the consumers). Thus with over 58 percent of the CPI weightage placed on items operating outside the SBP areas of influence and major input costs linked to full cost recovery dependent on not only international prices but also the rupee dollar parity accounts for energy prices in Pakistan higher than in other regional competitors. It is therefore inexplicable as to why IMF continues to place the onus of reducing inflation on SBP through policy rate manipulation. And, if one takes account of the fact that the bulk of domestic commercial bank borrowing is largely secured by the government, to the tune of around 75 percent, which it then proceeds to spend on current expenditure – a policy that is highly inflationary in itself the reliance on policy rate to control inflation is all the more inexplicable.

The CPI jump from January to February, of 1.92 percent, pre-dates the Middle East conflict and relates to the upward adjustments agreed under the ongoing IMF programme; notably, adjustments in administered electricity and gas prices, increase in transport costs through higher petroleum levy (a major source of government revenue that is not shared with the provinces). Interestingly, all Monetary Policy Statements (MPS) from last year to the present have not deviated from their medium-term projection of 5 to 7 percent, which compels one to regard this projection as a target dictated by the Fund but with risks highlighted. The 26 January MPS states that: “On balance, the Committee projects inflation to stabilize within the target range of 5 – 7 percent in FY26 and FY27, after temporarily exceeding the upper bound for a few months during this calendar year.” From March to April the CPI jumped by 3.6 percent that prompted the MPC to raise the policy rate by 100 basis points though on 27 April MPS again “assessed that the current supply shock may push inflation to double digits in the coming months before it starts to ease subsequently. However, inflation is expected to stay above the upper bound of the target range of 5 – 7 percent for most of FY27.”

To conclude, governments are extremely sensitive to inflation for political reasons and the way forward should be to calculate accurate data that resonates with the public and enables the Executive to take informed decisions both at the fiscal, monetary and sectoral levels.

Copyright Business Recorder, 2026

Pakistan’s external calm does not rest on a sustained expansion in exports, nor does it rest on any meaningful improvement in productivity, investment, or international competitiveness.

It rests overwhelmingly on record remittance inflows, supported by the State Bank’s continued purchases of foreign exchange from the interbank market. The underlying arithmetic is therefore less flattering than the headline current-account number suggests.

In FY26, Pakistan ran a deficit of approximately $35.5 billion on trade in goods and services. After including the deficit on primary income, largely interest and profit payments, the shortfall widened to nearly $44 billion. That gap was almost entirely offset by secondary income inflows of $43.8 billion, including $41.6 billion in workers’ remittances. Goods exports declined during the year, while goods imports increased. This was not an export-led improvement in the balance of payments. It was a remittance-financed expansion in import capacity.

The SBP has also been consistently buying dollars from the interbank market to rebuild reserves. That policy is understandable after the near-exhaustion of external buffers during the previous crisis. But reserve accumulation should not be confused with a spontaneous strengthening of Pakistan’s external earning capacity. The central bank has been capturing the liquidity created by exceptional remittance inflows and converting it into official reserves.

Those foundations are becoming more vulnerable just as geopolitical risks across the Middle East are intensifying. If the confrontation involving Iran and the United States persists or broadens, Pakistan could face pressure through several channels simultaneously.

Higher energy costs are the most immediate danger. Pakistan remains heavily dependent on imported petroleum, while much of its oil and liquefied natural gas supply passes through or near the Strait of Hormuz. Any sustained increase in crude prices, freight charges or insurance premiums would feed directly into the import bill, domestic inflation and the fiscal cost of energy. Yet the risks extend well beyond oil.

Pakistan has become increasingly dependent on remittances from workers abroad. These inflows have risen from approximately $27 billion three years ago to $41.6 billion in FY26, an increase of more than $14 billion. Over the same period, merchandise exports have stagnated in dollar terms and declined relative to the size of the economy.

Around 54 percent of Pakistan’s remittances now originate from Gulf Cooperation Council countries. Saudi Arabia contributed approximately $9.8 billion during FY26, the United Arab Emirates $8.8 billion and the remaining GCC economies another $3.9 billion. Excluding Saudi Arabia, around $12.7 billion in annual remittance inflows originate from Gulf economies directly exposed to disruptions in regional trade, aviation, tourism, construction and expatriate employment.

This does not mean that higher oil prices automatically reduce remittances. Historically, stronger hydrocarbon revenues can support Gulf employment, government expenditure and remittance flows. The present risk is different. A regional conflict that disrupts commercial activity, transport links, financial channels or expatriate labour markets could overwhelm the otherwise positive income effect of higher oil prices.

The vulnerability lies in concentration. Pakistan is relying on a narrow group of foreign economies to generate the income that finances an increasingly large domestic trade deficit. A 10 percent decline in non-Saudi GCC remittances would subtract roughly $1.3 billion from the external account, and Pakistan has no equivalent export engine ready to replace it.

A prolonged energy shock would also weaken demand in Pakistan’s principal export markets. Higher fuel prices would complicate monetary easing in Europe and the United States, constrain household consumption and soften demand for imported textiles, apparel and manufactured goods. Pakistan could therefore face a higher import bill, weaker remittance inflows and lower export demand at the same time. That combination, rather than any single shock in isolation, is what makes the present position precarious.

Domestic economic policy, however, appears to be moving in precisely the wrong direction. Despite repeatedly declaring its commitment to export-led growth, Pakistan has made exporting progressively less attractive. Merchandise exports have declined from roughly 8.5 percent of GDP in FY22 to around 6.8 percent in FY26. Exporters now face normal corporate taxation, super tax and the withdrawal of several earlier concessions, while continuing to absorb high energy costs, expensive financing, regulatory uncertainty and unreliable infrastructure.

Exchange-rate policy has also become increasingly rigid. The SBP’s published Real Effective Exchange Rate rose to approximately 106.4 in June, its highest level in several years. A REER above 100 does not automatically establish that the rupee is fundamentally overvalued. It does, however, show that the currency has appreciated substantially in inflation-adjusted terms relative to its trading partners.

That direction is difficult to reconcile with an export-led strategy when exporters are already facing compressed margins and rising domestic costs. Pakistan appears to want the outcomes associated with an export-oriented economy without accepting the prices, incentives or policy discipline required to create one.

The contrast with the information technology and business-services sector is revealing. Exports from these activities have risen significantly, supported by preferential taxation, easier payment arrangements and a lighter regulatory structure. Where incentives are broadly aligned with export growth, foreign-exchange earnings respond.

The problem is one of scale. Services exports increased to about $10 billion in FY26, but this remains insufficient to compensate for the deterioration in merchandise trade. Pakistan cannot repair a goods trade deficit exceeding $33 billion through software exports alone, particularly while weakening the competitiveness of agriculture, textiles and manufacturing.

The nature of the import recovery is equally concerning. Non-oil imports have rebounded sharply from their post-crisis lows and are now approaching their previous peak, even though economic growth remains below 4 percent.

At least part of this recovery appears to have a significant consumption component rather than reflecting new productive capacity. Imports of completely knocked-down automobile kits have reached record levels even though local vehicle assembly remains below its earlier peak, suggesting a shift towards more expensive vehicles and higher imported content. Similar patterns are visible in smartphones and other consumer goods. Consumption is therefore recovering faster than productive capacity, a configuration Pakistan has repeatedly encountered ahead of earlier external-sector crises.

If external pressures intensify, policymakers may once again turn to administrative restrictions on so-called non-essential imports. Pakistan has run this experiment before. It suppresses industrial production, creates shortages, damages investor confidence and temporarily compresses the current account without resolving the underlying shortage of export earnings.

Longer-term fundamentals offer little comfort. Investment remains exceptionally weak despite the improvement in headline macroeconomic stability. Foreign direct investment fell to approximately $1.6 billion in FY26, while domestic savings remain inadequate to finance the country’s development needs. The much-advertised mining opportunity has yet to translate into large-scale capital inflows, partly because deteriorating security conditions in Balochistan continue to raise project costs and deter investors.

There is also a growing policy-made risk around Pakistan’s access to European markets. The European Union’s latest review of the Generalised Scheme of Preferences has again raised concerns regarding civil liberties, media freedom, enforced disappearances and judicial independence. Pakistan’s GSP+ preferences are not facing immediate withdrawal, but closer scrutiny creates another avoidable risk for an economy whose exports are already concentrated in the European market.

Pakistan’s recent external stability should therefore be understood as a reprieve rather than a transformation. The latest revisions make that distinction even clearer. Across FY25 and FY26 combined, the current account was almost exactly balanced. Pakistan did not accumulate a large current-account surplus. It accumulated remittances and official reserves while running a progressively larger trade deficit.

Those reserves are valuable, as are record remittances and a broadly balanced current account. But none should be mistaken for structural resilience. Without stronger goods exports, higher investment and a more competitive productive economy, Pakistan remains dependent on migrant workers, central bank intervention and benign external conditions. Should the geopolitical environment become materially less forgiving, the apparent equilibrium could disappear much faster than the headline numbers suggest.

The central economic challenge for FY27 is therefore not simply whether Pakistan can grow by more than 4 percent. It is whether the country can sustain that growth without once again exhausting the foreign exchange required to finance it.

Copyright Business Recorder, 2026

While Pakistan was previously a beneficiary of the now-suspended US Generalized System of Preferences (GSP), the tariff relief was marginal, while trade flows remained substantial, signalling demand-driven trade between the two economies. For context, Pakistan exports approximately USD6.2 billion annually to the US, of which USD4.7 billion consists of textile and apparel products, and nearly 94 percent, or about USD4.4 billion, is value-added apparel.

In return, Pakistan is the second-largest importer of US cotton after Viet Nam. In FY 2025, it imported about USD877 million worth of US cotton, accounting for 52 percent of its total cotton imports, before declining to USD550 million in FY 2026, or 34 percent (source: PRAL)

Despite this substantial and interdependent trade flow, the absence of a formalized trade arrangement remains striking and may also contribute to a future decline in cotton imports from the U.S., as Pakistan often sources Brazilian cotton at more competitive prices.

This potential decline in bilateral trade is a situation that neither the US nor Pakistan would want.

Against this backdrop, a key concern is that the US is once again proposing additional tariffs of 10 percent on Pakistani goods under forced labour concerns, on top of the existing 10 percent imposed last year and the standard MFN tariffs. The US administration maintains that imported goods may carry embedded risks of forced labour within their supply chains.

While Pakistan is in the process of developing a national forced labour import prohibition framework, it also has an opportunity to engage the US proactively and strategically. In particular, Pakistan can negotiate tariff relief on its value-added textile exports in exchange for increased imports of US cotton - an approach that is both practically feasible and strategically advantageous. I will explain why.

A domestic constraint:

The rationale lies in Pakistan’s own structurally declining domestic cotton production base. Since reaching a peak of around 14 million bales in 2011–12, Pakistan has not been able to recover its cotton output.

One of the primary drivers of this decline is the sharp reduction in the area under cultivation. Cotton acreage has fallen from approximately 2.86 million hectares to nearly 1.7 million hectares, with much of this contraction occurring in Punjab, where the cultivated area has dropped to a 40-year low.

As a result, Pakistan’s cotton production currently stands at around 5.6 million bales in 2025–26, while the textile industry’s annual requirement is close to 16 million bales. This widening gap between domestic supply and industrial demand has made imports structurally inevitable, particularly as US cotton offers superior fiber characteristics and consistency, which are essential for producing value-added textile products such as denim and other high-end apparel.

The US perspective:

In parallel, the US is reorienting global supply chains. Under proposed measures related to forced labour, the Office of the US Trade Representative has introduced a tiered tariff structure, with 10 percent applied to economies that have taken partial steps to restrict imports produced with forced labour, and 12.5 percent applied to those without such frameworks.

Within this framework, the US has also proposed relief through a “Textile Mechanism,” under which countries can import American inputs, including cotton, and in return receive tariff relief proportional to the volume of those imports. If this mechanism is implemented, Pakistan could secure meaningful tariff relief by increasing imports of US cotton and incorporating it into textiles and apparel exported to the US market. The emerging framework suggests that economies integrating US-origin inputs into their exports may be better positioned to negotiate tariff concessions.

Why cotton is the right lever for a trade agreement:

Last year, Bangladesh announced a similar arrangement with the US, under which it exchanged increased imports of US cotton for tariff relief. This year, the USDA and USTR, under the Great American Cotton Plan, secured commitments from Indonesia and Bangladesh to support future purchases of US cotton tied to textile production and exports using American inputs. This is notable given that Bangladesh imports significantly less cotton from the US than Pakistan does, approximately USD235 million, or only about 6 percent of its total cotton imports of USD4 billion.

Pakistan, by contrast, imports on average around 40 percent of its cotton from the US. It is therefore well positioned to expand both its cotton imports and its exports of value-added textiles to the US market simultaneously.

Towards a mutually beneficial trade agreement:

According to APTMA estimates, the area under cotton cultivation is expected to decline further from the current 1.8 million hectares to 1.7 million hectares in 2026–27. Pakistan will therefore need to identify ways to prevent disruptions to its manufacturing base. While reviving domestic cotton production remains essential, the country must also leverage its existing and evolving trade linkages with the US.

In this context, the government should consider pursuing a formal agreement with the US on cotton, structured as follows:

• The US exports cotton to Pakistan in line with the requirements of Pakistan’s textile industry. Currently, Pakistan accounts for approximately 16 percent of US cotton exports, and this share has the potential to increase.

• In return, Pakistan secures a tariff waiver, or at least a reduction, on its value-added apparel exports. These exports are currently subject to tariffs of up to 16.3 percent under MFN rates, an additional 10 percent ad valorem duty following the reversal of emergency tariff measures, and a potential 10 percent Section 301 forced labour tariff in the absence of a meaningful bilateral arrangement.

Within the framework of international trade, this represents a mutually reinforcing and economically rational outcome for both Pakistan and the United States. A bilateral agreement of this nature is ultimately preferable to an expanding reliance on unilateral tariff measures.

Copyright Business Recorder, 2026

In recent months, the primary focus of hostilities has targeted military installations.

However, the current strategy employed by the United States includes assaults on critical infrastructure, covering airports, train stations, bridges, and other essential facilities.

In retaliation, Iran has executed attacks on US Special Forces bases, radar systems, power facilities, and desalination plants.

Moreover, Iranian military actions have extended to installations in Kuwait, Qatar, Bahrain, Oman, and Saudi Arabia.

Consequently, both parties have commenced operations aimed at dismantling not only each other’s military infrastructures but also economically significant sites.

Thus far, the repercussions of this escalating conflict on the financial sector and investor sentiment have been relatively minor, as evidenced by marginal gains in the US dollar, while oil prices have spiked by nearly 15 percent during a week without experiencing a substantial increase overall. Conversely, gold has faced sustained pressure and has experienced a decline in value. On the economic front in the United States, a softer Consumer Price Index (CPI) and Producer Price Index (PPI) released last week have alleviated some of the hawkish sentiments.

However, these sentiments may be of short duration due to the potential ramifications of rising oil prices on inflation forecasts. Notably, inflation stemming from the US-Iran conflict contributed to an increase in June’s average 30-year mortgage rate, which reached 6.5 percent.

The prevailing downward trend suggests that the market is exercising caution to avoid excessive exposure, subsequently reducing risk by the weekend to ensure preparedness for any further deterioration of the situation, which may present opportunities for much needed adjustments.

The expansion of US attacks and Iranian retaliatory measures targeting civilian infrastructure and US military positions in the Gulf region, alongside a naval blockade of Iranian ports, have significantly curtailed oil tanker traffic through the Strait of Hormuz.

As the geopolitical landscape worsens, both energy prices and supply chain logistics are under considerable strain, with the potential for further escalation.

Moreover, on the US economic front, mixed indicators have emerged. The ISM Services Index fell to 54 in June from 54.5 in May, although it remained above the previous high for the 24th consecutive month.

The housing sector has also shown weakness, as existing home sales declined by 2.4 percent, failing to meet projections.

Despite the recent US economic data suggesting a moderation in inflation, the simultaneous surge in oil prices and the risk of further escalation in US-Iran tensions have increased the likelihood of interest rate hikes, as prolonged conflict may necessitate such measures.

The outcome of this situation will largely hinge on the trajectory of oil prices in the forthcoming week, with Brent crude currently trading around $88 and the market appearing to accept a range between $85 and $92.

The limited increase in oil prices may be attributed to the US decision to retract a proposed 20 percent shipping fee for the Strait of Hormuz, following objections from the shipping industry and the International Maritime Organization.

Other contributing factors may include minimal damage sustained by naval assets and oil infrastructures.

The market remains vigilant, as any potential supply shock resulting in sustained oil prices exceeding $90 could precipitate severe unrest in oil-importing nations, particularly those burdened with debt.

This week, the Pound Sterling experienced a notable increase in value following reports that Prime Minister-elect Andy Burnham intends to appoint Home Secretary Shabana Mahmood to the position of Chancellor of the Exchequer. Mahmood is perceived as a more popular candidate with a robust profile in domestic policy matters.

Although the formulation of economic policy presents significant challenges, initial reactions from participants in Britain’s financial markets have been favourable.

This positive sentiment may stem from the belief that Mahmood possesses a fiscally disciplined approach, which is essential for the UK’s economy at this juncture.

Furthermore, it can be argued that Burnham’s leadership has also positively influenced the value of the Pound Sterling. The market had initially anticipated Ed Miliband to assume the Chancellor position. However, the official announcement is anticipated to occur shortly.

Additionally, the European Central Bank (ECB) is scheduled to convene on July 23 to decide on its policy rate. Despite a recent uptick in oil prices, it is projected that the ECB will maintain its current interest rates with a potential increase in September should the ongoing geopolitical crisis persist.

Nonetheless, the forthcoming projections from the ECB are expected to offer insights into the direction of its future decisions.

It is important to note that the effects of the policymakers’ decisions on the European currency may be limited, as the primary focus remains on the conflict between the United States and Iran.

WEEKLY OUTLOOK - July 20-24

#GOLD @ $ 4017- A bearish trend for gold is expected to persist, and sellers will likely keep selling as prices rise unless tensions in the Middle East subside.

If prices break above $4095, it could lead to a target of $4150 or higher. However, risk is that if the prices fall below $3938, it may prompt further declines to $3850 or lower.

#EURO @ 1.1439- Euro must surpass 1.1498 to reach 1.1535. However, a decline below 1.1402 could lead to a drop to 1.1350.

#GBP @ 1.3455- The Pound Sterling may experience additional gains prior to a potential decline. It is anticipated that it will remain constrained below the level of 1.3530.

A breach of the 1.3370 threshold could lead to a decline towards 1.3330. Conversely, movement above this resistance may result in an advance to 1.3570.

#JPY @ 162.39- As long as it doesn’t surpass 162.98 to reach 164.10, the JPY may test levels at 161.40 or 159.20.

Copyright Business Recorder, 2026

In some cases, political conflicts and enmity are carried over into economic relations and trade-enhancement activities. The non-tariff barriers (NTBs) are one of the most drastic impediments to the mutual trade of neighbouring countries. It is included in such tactics, which can fail the targets and objectives of the regional connectivity.

The South Asia Free Trade Area (SAFTA) is one of the examples of such unsuccessful stories, which reflect the consequences of non-tariff barriers (NTBs). Despite several efforts and policies to enhance the mutual trade of South Asian nations, their mutual trade is less than 4 percent of their global trade.

Similarly, there are no visible signs of cross-border mobilization of capital, labour, or entrepreneurship. The formation of the South Asian Association for Regional Cooperation (SAARC) and its subsidiaries, including the SAARC Chamber of Commerce & Industry (SCCI), ratification of the South Asia Preferential Trade Agreement (SAPTA), establishing the South Asia Free Trade Agreement (SAFTA), and granting the status of most favoured nation (MFN) are steps that have been taken in the past. None of these steps provided a revolutionary development in the trade relations of the South Asian countries in general and Indo-Pakistan relations in particular.

There are two obvious reasons behind the ineffectiveness of the mutual trade enhancement strategies. The first reason for this undesired outcome is the transmittal of political conflicts between India and Pakistan into trade barriers. Despite relaxation in tariffs and free trade agreements, several types of NTBs are still active, and even enhanced. The second reason is that the countries in South Asia do not depend on each other; their industries are not vertically integrated, and their products and services do not complement each other.

The history of their mutual trade reveals the transmission of the first reason. The SAARC Preferential Trading Agreement (SAPTA) was signed in 1993. During the SAPTA regime, there were positive lists for the duty-free imports between India and Pakistan. After six years of its implementation, only a marginal improvement in their mutual trade was observed. Much of their trade is considered symbolic and generally does not involve the trade of vital commodities. The formation of the South Asian Free Trade Area (SAFTA) in 2006, and the conversion of the positive list into the negative list, removed the tariff barriers in the imports of all commodities except the items in the negative list. However, no significant enhancement in the mutual trade has been observed because of the rapid growth in NTBs in the trade between India and Pakistan.

To know the use of NTBs to restrict or block the imports of goods from a country, it is important to understand first the mechanism of non-tariff measures (NTMs). In principle, NTMs include all measures, besides tariffs, that are used to protect a domestic economic activity. They may be imposed or sponsored by the government. In the presence of a free trade agreement, NTMs are used to reinforce the restrictions on imports. To identify NTMs is not a simple task, and there is no agreed-upon definition of NTMs. The measures to influence prices, quantity, para-tariff, financial transactions, competitiveness, export-related investment, distribution restrictions, restrictions on post-sales services, subsidies, government procurement restrictions, intellectual property, and rules of origin are included in the NTMs. Some of the NTMs may be imposed based on the legitimate goals: measures to protect national security, the environment, sanitary and phytosanitary measures, and technical trade barriers are included in those legitimate measures that are compatible with WTO principles.

If the main objective of a requirement is not based on moral grounds but primarily it is for the protection of domestic economic activity, it will be considered an NTM. If this NTM is not for all trading partners but for a specific country, it will be considered as an NTB. The existence of non-tariff barriers (NTBs) may complicate the issue of NTMs in the case of bilateral trade between neighboring countries that have severe geopolitical conflicts. The arbitrary, inconsistent, and discriminatory behavior of the dealing officials of importing country, favoring specific producers or suppliers, inefficiency or cases of outright obstruction, non-transparent practices, legal obstacles, and unusually high fees or charges are included in NTBs.

The tools and types of NTBs cannot be identified unless they are observed. In most of the cases, such barriers may be invisible, and identifying those invisible barriers is not a simple task. These are changed from time to time and vary from product to product. Regular investigation and monitoring are always required to perform this task.

The majority of Pakistani exporters noted the different types of NTBs used by the Indian trade regulatory agencies. Sanitary and phytosanitary measures through some laws, a strong focus on food security and self-sufficiency, a complex licensing system varying according to product or user, frequent use of anti-dumping measures, the duties and over charges, use of reference prices for some products to align with international market prices, import of some goods only through specified ports, import only by state trading agencies, quarantine requirements in case of agriculture and textile related products, stringent visa requirements, import prohibitions and licensing in the name of health,safety, security,religious and environmental reasons, and approval requirements by relevant ministries/ agencies are included in those measures.

According to a study jointly conducted by the national chambers of commerce and industry of South Asian countries under the guidance of the NTM desk established by the SAARC, 61 percent respondents identified the problems in land transportation, more than 50 percent indicated the problems in getting visas and harassment during visits, and 60 percent mentioned the problems in handling at ports and dealings of customs. Several types of problems in certification requirements, the port of entry, and banking transactions are also identified by the desk.

Based on the surveys conducted by different think tanks and policy institutes, some issues have been identified by the exporters of India and Pakistan. Regarding the issuance of visas, both sides of exporters identified that too much documentation, limited duration of visit, limited number of cities, police reporting, and no multiple visas are the main problems. Pakistani exporters also identified that arranging a sponsorship and delay in obtaining a visa are also important issues.

Concerning the transportation infrastructure and logistics, both sides’ exporters highlighted the shortage of railway wagons and the modal change at the border as problematic areas. Furthermore, Indian exporters mentioned that the restricted list of goods by land route and the absence of alternative land routes are problematic areas.

Regarding the testing and quarantine facilities, both sides indicated the absence of border facilities, while Indian exporters added the delays in certification due to the multiplicity of agencies. Both sides highlighted the problem in the movement of consignment from one state/ province to another. So far as customs-related issues are concerned, both sides agree that delays in clearing consignments and security checks are the main issues. The Indian exporters highlighted that the lack of harmonization of product classification is also an issue. Regarding banking transactions, both sides mentioned that problems in opening L/Cs, delays in receipts of payments, and high cost of transactions are major issues.

A “Most Favored Nation (MFN)” status provides a simple and immediate solution to the NTBs after their identification. So, Pakistan decided to grant the most favored nation status to India in January 2013, while India had already granted this status to Pakistan. Later on, this term was replaced by the “Normal trade relations (NTR)”, because of ambiguity in the use of MFN. Interestingly, the United States had also renamed the “Most Favored Nation status” as “Permanent normal trade relations(NTR)” in1998. The drive for this amendment in terminology came from irritation voiced by some Americans that some dictatorial governments around the world enjoyed beinga”most favored nation“ of the United States.

However, the reciprocal granting of MFN status by India and Pakistan did not succeed in enhancing their mutual trade. Certainly, the political conflicts and their consequent effects on the attitude of people on both sides are one of the reasons. The second important reason is the nature of the structure of their output, exports, and imports.

India has advantages in the supply of medium and high-tech exports. The share of its agriculture in its GDP is significantly lower than that of Pakistan. Their policymakers expect and want to establish “Business-to-business (B2B) relations with Pakistan.

In most of the cases, on different platforms, they strongly emphasize establishing B2B relations with Pakistan. In this type of trade relations, they expect that Pakistan will supply primary goods and raw materials to their industrial units, and will import plants, machinery, and high-tech products. In this way, Indian exporters do not need to take marketing risk.

As a result, prices of basic goods will increase in Pakistan. In the past, the trade policies of Pakistan were softer than Indian trade policies. The import of capital goods from India will lead to Pakistan’s dependency on the Indian industrial sector. An important point is the role of several types of frequent subsidies to the Indian private sector in building its capacity and competitiveness. The development and modernization of logistic infrastructure by the Indian government plays an important role in building its industrial competitiveness.

The indicators of logistic infrastructure in India depict that its position is better than the world average. Due to several fiscal constraints and agreements with the IMF, Pakistan cannot afford subsidies. The past experience can predict that foreign exchange will not come into Pakistan through exports to India. Because importing from India will be more profitable than exporting Pakistani products to India.

However, the best model for Pakistan is “Business-to-consumer (B2C)”. The data on trade patterns shows the competitiveness of the manufacturing sectors of both countries. There is a high demand for Pakistani consumers’ products in India. The garments, leather products, sports goods, plastic, cutlery, furniture, packaged halal food, and several other consumer goods are included in these goods. Pakistani companies can establish their showrooms, customer support centers, and marketing offices in India, while India does not favor this model.

Having said that, not only is current expenditure much more than development expenditure, the gap has also increased from what was budgeted, and what is estimated to be actually spent. Here, budgetary estimates for current expenditure were 2.18 times more than the budgetary estimates for development expenditure for FY26, while in terms of revised estimates, current expenditure was 2.21 times more than development expenditure.

It needs to be noted that budgetary estimates for current- and development expenditures have not been provided for FY27, which is strange in view of the fact that Sindh, KPK, and Balochistan provide these estimates.

With regard to Sindh, budgetary estimates for FY27 for current expenditure were more than the budgetary estimates for FY26 by Rs 418 billion, and more than revised estimates by Rs 352.7 billion to stand at Rs2.6 trillion; whereas revised estimates for current expenditure for FY26 were of more than budgetary estimates by Rs 65.4 billion to stand at Rs2.2 trillion.

On the other hand, budgetary estimate for development expenditure for FY27 stood at Rs720.4 billion, which is less than the budgetary estimates for FY26 by Rs.298 billion, and less than revised estimates by Rs 223.6 billion.

Also read: Reflections on provincial budgets FY27—IV

Here, budgetary estimates for current expenditure for FY26 are 2.1 times more than the budgetary estimates for development expenditure, and the gap increases when seen in terms of revised estimates to 2.3 times, while in terms of budgetary estimates for FY27 the gap between current- and development expenditures increases all the more, and quite considerably, whereby current expenditure is 3.6 times more than the development expenditure.

It is strange that the ‘annual budget statement 2026-27’ for KPK does not include calculation on budget balance, and also not on primary balance. This author’s own calculations indicate that budgetary estimates for budgetary balance for FY27 stood at negative Rs48 billion, while budgetary surplus was targeted, given budgetary estimates for FY26 stood at negative Rs157 billion, revised estimates expected a budget deficit of Rs154.5 billion.

Here, budgetary estimates for provincial consolidated fund – composed of ‘general revenue receipts’ (which in turn includes ‘tax receipts’ and ‘non-tax receipts’), ‘development receipts,’ and ‘capital receipts (Account-I)’ – for FY26 stood at Rs 2.119 trillion, where revised estimates are expected to be less by Rs 232 billion, while budgetary estimates for FY27 are being targeted at Rs.2.122 trillion, which are more than the revised estimates by Rs 235 billion.

Also read: Reflections on provincial budgets FY27—III

Moreover, budgetary estimates for total expenditure for FY27 stood at Rs 2.170 trillion, which is more than the budgetary estimate for FY26 by Rs208 billion, and revised estimates for FY26 by Rs 128.5 billion.

Moreover, as per this author’s calculations, budgetary estimates for primary surplus for FY26 stood at Rs 207 billion. Having said that, the revised estimates for FY26 indicated a primary deficit of Rs 154.5 billion, which is being targeted to be narrowed to Rs.3 billion, given budgetary estimates for FY27. Here, budgetary estimates for debt servicing for FY26 stood at Rs 50 billion, while the revised estimates stood at Rs.40 billion, and budgetary estimates for FY27 stood at Rs 45 billion.

Here, a relative lack of increase in already low level of direct taxes, when compared with indirect taxes – that stood at Rs 811.4 billion as per budgetary estimates for FY27 – which are enhanced by Rs 108 billion over the revised estimates for FY26 to stand at Rs 695.4 billion, means that development expenditure is likely to receive the burden of drastically narrowing primary deficit, given current expenditures, in fact, have been budgeted for FY27 to increase by Rs.208.4 billion over the revised estimates for FY26 to stand at Rs.1.6 trillion, while budgetary estimates for FY27 for development expenditure have been slashed by Rs 84.2 billion over the revised estimate for FY26 – and over the budgetary estimate for FY26 by Rs 22.7 billion –to stand at Rs 524.3 billion.

Also read: Reflections on provincial budgets FY27—II

Here, it needs to be indicated that fiscal consolidation – or fiscal austerity, one way is to pursue primary surplus, for instance – not only negatively impacts economic growth, inclusivity, and resilience, but also has political economic implications, as a ‘Vienna Institute for International Economic Studies’ May 2026 published working paper ‘Fiscal consolidation and political instability’ by Philipp Heimberger, and Anna Matzner indicated that it accentuated the situation of political instability.

Taking the case study for advanced countries, where, according to the paper, ‘As fiscal deficits and public debt ratios remain high across many advanced economies compared with their pre-pandemic and pre-energy-crisis levels, governments are under pressure to undertake fiscal consolidation to strengthen their public finances… Studying the political consequences of fiscal tightening is essential for understanding the conditions under which efforts to restore public finances may destabilise governments and societies, thereby potentially hindering economic development and undermining effective policy making’ it needs to be indicated that the impact of fiscal consolidation may likely be more acute in the case of developing countries, with relatively much higher development, welfare, and resilience needs, especially which are also highly vulnerable to climate change, and commodity shocks, like Pakistan, where also a significant proportion of population is below the poverty line.

Also read: Reflections on provincial budgets FY27—I

With regard to the results of their study, the working paper taking ‘…a sample of 17 countries of the Organisation for Economic Co-operation and Development (OECD) over the 1980-2020 period’ pointed out, ‘We estimate the effects of fiscal consolidation shocks across these outlined dimensions of political instability– government approval, major government crises, anti-government demonstrations, and general strikes– over the short to medium term. …we find that fiscal consolidation affects political-instability outcomes mostly in the short run.

Following a fiscal consolidation shock, governments face declining approval and increased probability of protest activity and government crisis. While the state of the economy and the composition of consolidation shape approval dynamics, acute forms of political instability appear to respond mainly to the overall contractionary fiscal stance.’

(Concluded)

Copyright Business Recorder, 2026

During daytime conditions within an approximate range of 28°C to 35°C, Bt gene expression, particularly Cry1Ac, is generally reported to remain relatively stable across many experimental settings. Under such conditions, cotton plants are able to produce sufficient levels of Bt toxin, often described in literature as varying within a biologically effective range that supports protection against key Lepidopteran pests, including American bollworm and pink bollworm. At this stage, pest pressure is typically reduced, and the plant’s endogenous defense system functions effectively.

When daytime temperatures rise beyond moderate thresholds, generally above 36°C and into the low 40s, cotton plants begin to experience increasing levels of heat stress. This stress is associated with reduced gene activity and a decline in Bt protein synthesis. In many studies, such conditions are linked with a noticeable reduction in toxin expression, which may weaken the plant’s defensive capacity. Under extreme heatwave conditions, particularly when temperatures exceed approximately 43°C, this decline becomes more pronounced. The reduction in Bt protein levels is often associated with disruptions in physiological processes such as nitrogen metabolism, protein synthesis, and oxidative balance, all of which are known to influence overall plant performance under stress conditions.

Nighttime temperatures play a critical role in physiological recovery and metabolic stabilization. When night temperatures remain within a relatively cooler range of about 20°C to 28°C, plants are generally able to recover from daytime stress, allowing partial restoration of metabolic activity and stabilization of Bt gene expression over time. However, when night temperatures remain elevated, typically in the range of 28°C to 32°C, this recovery process becomes less efficient, and plants may remain under sustained stress. In situations where night temperatures exceed approximately 32°C, which are increasingly observed during heatwave events in southern cotton-growing regions of Pakistan, the crop may experience continuous physiological strain with limited recovery potential.

In many cotton-growing regions of Pakistan, prolonged heatwave conditions often involve daytime temperatures reaching the mid to high 40s, combined with elevated night temperatures. Under such circumstances, cotton plants may experience extended periods of thermal stress with limited physiological recovery windows. This persistent stress environment is widely considered to contribute to reduced stability of Bt protein expression, increased pest survival, and accelerated development of pest resistance. Consequently, farmers often report higher reliance on insecticide applications, which can increase production costs and potentially disturb ecological balance in agro-ecosystems.

This climate-related challenge is further compounded by structural issues within the agricultural system, including variability in seed quality, inconsistent genetic purity, and gaps in extension services. Historical observations from severe climatic seasons in parts of southern Punjab highlight how the combination of extreme heat stress and compromised seed quality can negatively affect Cry1Ac expression and overall crop resilience under field conditions.

As Bt expression becomes less stable under environmental stress, pest populations may adapt more rapidly, increasing the risk of resistance development. This often leads to greater dependence on chemical control measures, which may have unintended consequences such as disruption of beneficial insect populations and the emergence of secondary pest outbreaks, including whitefly resurgence. In this context, Bt cotton is increasingly viewed not as a standalone solution but as part of a broader agro-ecological system requiring integrated management.

Ensuring the long-term sustainability of cotton production in Pakistan therefore requires a shift toward integrated approaches that combine climate-resilient irrigation practices, balanced nutrient management, optimized sowing windows, and effective integrated pest management (IPM) strategies. In parallel, advances in biotechnology, including multi-gene stacked traits and CRISPR-based approaches, are being explored globally as potential avenues to improve stress tolerance and stabilize gene expression under challenging environmental conditions.

Ultimately, the long-term performance of Bt cotton in Pakistan is closely linked to the interaction between the 24-hour thermal cycle, genetic stability, and adaptive agronomic practices. Understanding this interaction in the context of a changing climate is increasingly seen as essential for developing sustainable and resilient cotton production systems.

In the UK, The Times article indicates a troubling trend: including the government is focusing on environmental initiatives like planting hedges and woodlands – over actual food production to feed humans, skyrocketing costs of diesel and fertilizers, forces farmers to keep fields fallow. UK produces 62 percent of its own food, and 83 percent of fruits are sourced from abroad that is vulnerable under existing geopolitical conflicts, and lastly the inflation outlook by which food prices are on track to be 50 percent higher than 2021 cost of living crisis. The same has also proposed solutions to emphasise on food production with guaranteed minimum payments to farmers with supporting regenerative farming to reduce reliance on synthetic fertilizers and rely on domestic ammonia plants producing ammonium nitrate.

Similarly, reports indicate in the USA, the younger generation is increasingly distancing themselves from agricultural professions due to economic pressures and changing lifestyle choices. The rising costs of living, coupled with the allure of urban job opportunities, lead many young people to view farming as an outdated or unviable career. This decline in agricultural interest threatens sustainability and contributes to food insecurity, as fewer farmers mean diminished food production and reliance on an ageing agricultural workforce. As younger generations prioritize technology and urban lifestyles, traditional farming risks being sidelined, emphasizing the need for a reimagined agricultural narrative.

In Pakistan, the plight of smallholder farmers in Punjab and large landowners in Sindh presents a complex agricultural dilemma that mirrors challenges seen globally. Small farmers in Punjab face mounting pressures to maintain viability amidst rising input costs and limited access to modern agricultural technologies. The consequences of food inflation compromise their ability to sustain livelihoods, exacerbating an existing food security crisis. Meanwhile, large landowners in Sindh leverage significant influence over agricultural production and policy, often overshadowing smaller farmers and creating a two-tier system that undermines the contributions of smallholders. This disparity threatens the national capacity for food production and market stabilization, highlighting an urgent need for reform.

Compounding these challenges is the recent return of over 1,000 agriculture graduates and experts who have undergone extensive training in modern agricultural technologies in China. Equipped with advanced knowledge and skills, these individuals represent an invaluable resource for revolutionizing the agricultural sector in Pakistan. However, many of these trained professionals currently find themselves without suitable positions, budgets, or avenues to apply their expertise effectively. This situation not only squanders their potential to drive innovation in sustainable farming practices but also exacerbates the existing challenges in food security.

To leverage this wealth of knowledge, it is crucial to allocate specific roles and budgets that enable these experts to participate meaningfully in agricultural development. Collaborations between these trained professionals and local farmers can facilitate knowledge transfer and practical application of innovative practices, enhancing agricultural productivity and sustainability. Additionally, creating educational scholarships in agricultural sciences, low-interest loans for startups, and grants for innovative farming methods could reframe agriculture as a viable and respected career path for the youth.

Moving forward, there is a pressing need for a new social contract for agriculture in Pakistan—one that prioritizes the needs of all stakeholders. This contract must encompass transparent pricing mechanisms, timely support for farmers, and the development of infrastructure that fosters productivity. A collaborative approach involving both public and private sectors can lead to better outcomes, as investment in farming technologies and sustainable practices address both production needs and environmental concerns.

The challenges posed by global agricultural trends offer both caution and opportunity for Pakistan. By resowing the seeds of food security through renewed investment in smallholder farming, fostering youth engagement, and leveraging the expertise of trained agriculture graduates, Pakistan can pave the way for a sustainable agricultural future. It is imperative to recognize the importance of nurturing our agricultural community as an essential foundation for food security and national well-being.

Every year, the nation is presented with a new financial explanation for the worsening circular debt—insufficient recoveries, delayed payments, subsidy shortfalls, or the latest inability to meet an IMF target. Yet these are merely symptoms, not the disease.

Pakistan’s power sector circular debt is fundamentally a governance crisis that has been allowed to fester across the entire energy value chain. Until transparency, accountability and institutional discipline replace opacity and vested interests, no amount of financial engineering or IMF conditionality will provide a lasting solution.

The latest reports that Pakistan has failed to honour its commitment to the International Monetary Fund (IMF) to contain the power sector’s circular debt at Rs1.614 trillion by June 30, 2026, should surprise no one. Officials have attributed the slippage—estimated at around Rs300 billion—to K-Electric’s outstanding payments and the weak financial performance of several power distribution companies (Discos).

Similar explanations have been offered repeatedly over the past decade.

These arguments conveniently divert attention from the real issue. Circular debt is not created because one company delays payment or because another utility performs poorly. Those are merely the final manifestations of a much deeper structural problem.

Circular debt is born from chronic failures of governance throughout Pakistan’s energy supply chain.

The problem begins well before electricity reaches the consumer. It starts with procurement decisions, fuel imports, pricing mechanisms, storage arrangements, transportation logistics, contractual obligations and operational oversight.

Weak planning, inadequate monitoring and poor enforcement create inefficiencies at every stage. Each inefficiency adds a hidden cost that eventually appears as another increase in circular debt.

The generation segment is no exception. Both public-sector generation companies and Independent Power Producers (IPPs) operate within a framework that has historically lacked sufficient transparency and rigorous performance auditing. While recent renegotiations with several IPPs have reduced some financial burdens, questions remain regarding plant utilisation, operational efficiency, fuel optimisation, maintenance practices and capacity planning. Without continuous independent oversight, inefficiencies become institutionalised rather than corrected.

The transmission network represents another weak link. Technical losses remain significantly above international benchmarks in several areas because of ageing infrastructure, delayed investments and inadequate maintenance. Every unit of electricity lost before reaching consumers ultimately becomes an additional financial burden on the system.

Distribution companies continue to suffer from weak governance, political interference and limited managerial accountability. Electricity theft, inaccurate metering, delayed billing, poor recoveries and operational inefficiencies continue despite years of reform programmes.

Honest consumers are effectively penalised by paying higher tariffs to compensate for the losses created by theft and inefficiency elsewhere in the system.

Nor does the challenge end with electricity. Pakistan’s oil and gas sectors are closely intertwined with power generation. Delayed payments, leakages, weak contract management, unaccounted-for losses and governance shortcomings within fuel supply companies create additional distortions that ripple across the entire energy ecosystem.

Consumer behaviour also forms part of the equation. Power theft, gas theft, meter tampering and non-payment have become widespread in many regions.

Weak enforcement, political patronage and lengthy legal processes have undermined deterrence. As long as theft remains a low-risk, high-reward activity, the financial burden will continue to be transferred to compliant consumers and the national exchequer.

Successive governments have largely relied on financial fixes rather than structural reforms. They inject subsidies, borrow additional funds, restructure liabilities, increase tariffs or negotiate temporary arrangements with creditors. These measures may slow the accumulation of circular debt for a few months, but they do not eliminate the governance failures that continuously regenerate it.

The IMF understandably focuses on measurable fiscal outcomes, including limits on circular debt accumulation. However, financial targets alone cannot cure institutional weaknesses. Even if the government somehow succeeds in temporarily reducing the stock of circular debt through borrowing or accounting adjustments, the debt will inevitably return unless governance across the entire value chain is fundamentally reformed. Pakistan therefore requires a shift in both diagnosis and treatment.

The starting point should be complete transparency throughout the energy supply chain. Every stage—from fuel procurement to final billing—should be digitally monitored, independently audited and publicly reported. Operational performance indicators for generation companies, transmission operators, distribution companies and fuel suppliers should be published regularly, allowing both Parliament and the public to hold institutions accountable.

Equally important is professional management insulated from political interference. Board appointments should be based on competence rather than patronage, while chief executives must be evaluated against measurable operational targets.

Regulatory institutions must be empowered to enforce compliance without fear or favour.

Modern technologies can significantly reduce losses. Smart metering, digital billing, advanced grid management systems, predictive maintenance and data analytics have transformed utility performance in many countries.

Pakistan possesses the technical capability to adopt these solutions but requires the political will to implement them consistently.

The circular debt debate must therefore move beyond accounting numbers and payment disputes. The recurring annual explanations have become increasingly unconvincing because they ignore the underlying disease. K-Electric’s dues or the poor performance of a few Discos may explain part of this year’s increase, but they do not explain why the same crisis has persisted under successive governments for nearly two decades.

Circular debt is ultimately a mirror reflecting the quality of governance in Pakistan’s energy sector. Unless every leak across the supply chain is identified, exposed and permanently sealed, the debt will continue to circulate—regardless of tariff increases, IMF programmes or periodic financial restructuring.

Pakistan does not suffer from a shortage of financial solutions. It suffers from a shortage of transparent governance, institutional accountability and the political courage to confront entrenched vested interests.

Copyright Business Recorder, 2026

This by far is not an isolated incident but happens all over the city where young men unmindful of the dangers involved turn main roads into cricket stadiums and not only hit out brazenly in crowded traffic but in pursuit of shots and to earn fame as outstanding fielders run through fast traffic unmindful of the dangers involved. It is heart stopping to see these youngsters almost trying to halt the flow of traffic to retrieve what they are pursuing whether it is a cricket ball or as the season nowadays prompts a football. All this is not without serious dangers that threaten the life of young children in the city.

There is a long list of accidents claiming young lives while involved in various sports on the streets of Karachi. A recent study lists children playing on streets and service roads as one of the four major groups most affected by traffic-related injuries.

The reason given is that there are no safe playing grounds. This is another reason for dumpers and other heavy vehicles being frequently involved with traffic accidents involving children. In 2024, there were 715 people, who were victims of traffic accidents, including 73 children.

One reason being that in densely populated neighbourhoods’ roads double as play areas due to the absence of safe spaces for children to play. You cannot, on the other hand, also keep children indoors all the time. Some major accidents happened as a result of this trend.

Here are some examples such as an accident involving 7-year-old Abdullah and 6-year-old Ali who were playing cricket in a service lane outside their apartment. Abdullah ran out to the road to retrieve the ball and was hit by a car being driven by a learner.

Abdullah died on the spot. Another story from Orangi Town details another accident in which four children had left their Madressa and were playing cricket when a speeding water tanker ran over them, killing two on the spot with skull fractures.

There are also examples from other parts of Karachi, mostly from the underprivileged areas, where children have no choice but to play on the roads amongst fast-moving traffic and no safety.

The underprivileged lot does not have access to parks like the Bin Qasim Park, Aunty Park and several others that are largely found in affluent parts of Karachi, though there are attempts to provide some parks and playgrounds in the previously neglected parts of Karachi.

According to estimates, 5 million children in Karachi do not have a proper playground or park within easy accessibility. With this paucity of play grounds the situation is compounded with the conversion of existing playgrounds and parks into commercial and residential projects.

As it stands today, according to some rough estimates, there are 40 to 50 major parks and playgrounds while as announced by the authorities 30 more major parks are being built; these to cater, according to estimates, to 8.5 million children and teens.

So how is the world providing playgrounds to their children in the more developed countries? The best in England is Norwich with 236 children per playground, and the worst is Liverpool with 1104 children per playground. A lot of planning goes into making these playgrounds.

Most of these playgrounds have 4 to 7 square meters of playground space per child to prevent over-crowding. What about Karachi? How do we stand in terms of space? It is rather a sad reflection on our services for children.

Play areas in Karachi presently cater to 40,000 children per play ground. Not a very healthy figure, but it seems steps are being taken to improve the situation and though we might not be able to compete with Europe we will at least improve the present availability of parks for children and save them from playing with fire on the streets of Karachi.

Copyright Business Recorder, 2026

Pakistan, which imports around 80 percent of its oil and almost 100 percent of its liquefied natural gas (LNG) from the Middle East, remains highly exposed to such external shocks. The recent tensions led to concerns over energy security, fluctuations in international oil prices, and increased uncertainty in trade and financial markets.

The episode underscored Pakistan’s overreliance on the Middle East for energy imports, exports, and external financing.

Therefore, Pakistan has to diversify its exports, imports and external financing to kick-start the economy and reduce its exposed reliance on the Middle East.

Though export and financial constraint need short-term policy responses to address the issues and reduce adverse impact, Pakistan needs structural reforms to diversify its energy sources, modernize its industrial base, and expand sectors that generate high economic value with lower energy dependence.

In this context, the next phase of China–Pakistan Economic Corridor (CPEC 2.0) can play an important role to diversify Pakistan’s trade, ensure stable energy supply and mitigate financial constraints.

The first phase of China-Pakistan Economic Corridor (CPEC 1.0) laid a strong foundation for Pakistan’s economic development by building modern highways, logistics corridors, and upgraded port facilities. These initiatives strengthened Pakistan internal connectivity and enhanced its regional linkages.

Now CPEC 2.0 main focus is to promote trade by technological and industrial transformation and putting emphasis on industrial cooperation, digital connectivity, and technological advancement, particularly through Science, Technology, and Innovation (STI) framework. CPEC 2.0 will also bring latest technical know-how in the field of green energy and will transform Pakistan energy sector by using domestic renewable energy sources. This can reduce Pakistan’s dependence on imported fossil fuels and will increase her export competitiveness. Renewable energy will also shield Pakistan’s economy from recurring global energy shocks.

Technology can also transform Pakistan’s agricultural sector, which remains a key pillar of the national economy. Modern farming techniques such as precision agriculture, satellite-based crop monitoring, climate-resilient seed varieties, and smart irrigation systems can significantly improve productivity while reducing water and energy consumption.

Collaboration between Pakistani and Chinese research institutions under CPEC 2.0 is going to facilitate the adoption of these technologies, helping farmers adapt to climate variability and will increase agriculture productivity. Industrial modernization represents another crucial dimension of the technological transition.

The establishment of Special Economic Zones under CPEC provides a platform for advanced manufacturing and industrial upgrading. By integrating automation, robotics, and modern production technologies, Pakistani industries can improve efficiency, reduce energy consumption, and produce higher-value products for international markets.

The transition of Pakistan’s agriculture and industrial production toward technology-intensive manufacturing will improve export competitiveness in the coming decades.

Integration in regional and global supply chain is important for diversifying and increasing competitiveness of external sectors. Enhanced transportation infrastructure under CPEC 2.0 allows goods to move more efficiently between Pakistan, China, Central Asia, and global markets.

Lower logistics costs and reduced transit times encourage trade expansion and attract investment, reinforcing Pakistan’s role as a regional economic bridge. CPEC 2.0 will connect Pakistan with energy-rich Central Asia and thus help Pakistan diversify its reliance on the Middle East for energy.

Finance is the backbone of economic activities. Increase in import bill, reduction in export and low tax base compel Pakistan to seek external finances from Europe and the Middle East.

China has gradually integrated itself into global financial system. This gives Pakistan an opportunity to diversify its external financing and reduce Pakistan’s dependence on a few financial markets.

Recently, Pakistan successfully launched Panda bond in China and secured USD 1.76 billion at 2.5 percent. This is a renewed trust in Pakistan’s economic stability and a good signal for investment under CPEC 2.0. CPEC 2.0 is a good source to diversify external financing and increase investment in socio-economic sectors.

Pakistan can benefit from the renewed interest of Chinese investors. However, Pakistan needs to prepare itself if she wants to cash in on this golden opportunity.

The current tensions involving Iran, the United States, and Israel illustrate the fragility of global energy supply chains and trade routes. For energy-importing countries such as Pakistan, geopolitical disruptions can quickly evolve into economic crises.

Reducing vulnerability to such shocks requires long-term structural changes. By effectively leveraging financing, technological and innovation-driven components of CPEC 2.0, Pakistan can gradually transition toward a diversified, knowledge-based economy. Such a transformation would not only strengthen export competitiveness and reduce pressures arising from energy shocks but it will also build a more resilient and sustainable economic future for the country.

Copyright Business Recorder, 2026

We are at that inflection point again, and now this notion of transformation is far larger than a technological trend with perpetual powers of AI to shape human society. The current AI revolution is being built around an expensive and highly concentrated model of computing. Today’s most advanced AI systems depend on massive cloud infrastructure, giant data centers, sophisticated chips and enormous energy consumption. The scale of this concentration is becoming difficult to ignore.

According to Stanford University’s 2026 AI Index Report, private AI investment in the United States reached nearly $286 billion in 2025 alone. For developing countries such as Pakistan, competing on the same terrain would be economically unrealistic. Building hyperscale infrastructure requires vast investments in energy, computing power and digital ecosystems that many states simply cannot sustain.

Yet a quieter shift is now unfolding at AI revolution, the AI at Edge, where the opportunity for Pakistan emerges. Unlike the centralised AI systems dominated by massive cloud infrastructure and technology giants, the emerging technologies offer countries like Pakistan a rare opportunity to bypass traditional barriers and carve out a meaningful place in the global AI economy. The global market for Edge AI tend to outpace in the coming decade with estimated value between $140 billion and $385 billion by the mid-2030s. Countries that develop expertise in this domain could secure an important position in the next phase of technological growth.

Pakistan is not without advantages. Every year, the country produces thousands of graduates in computing, engineering and related disciplines, while its startup and software sectors continue to expand. The country has already demonstrated capabilities in software development and ICT exports. With strategic investment, Edge AI could help create a new generation of engineers capable of developing intelligent, and low-cost solutions for domestic and global markets alike.

The benefits would extend beyond technology. High-value employment, stronger technology exports, foreign investment and a more resilient digital economy could follow. In an increasingly AI-driven world, the ability to build intelligence at the edge may become an important component of economic competitiveness and technological sovereignty at par with the developed nations.

To seize this opportunity, universities, policymakers and industry must move beyond rhetoric and begin building real technical capacity. Edge AI should be integrated into engineering and computing programmes through specialised labs, updated curricula and industry-linked training.

Pakistan also needs a broader ecosystem for research, innovation and entrepreneurship built around collaboration between academia, the private sector and international partners. National AI policy reforms can include practical, compute and energy-efficient technologies suited to the country’s economic constraints.

Ahead of the FY27 budget, the Planning Commission objected to diverting Rs126 billion from the federal Public Sector Development Programme (PSDP) to finance security and water-sector commitments, but that debate overlooked a much larger shift. Roughly Rs920 billion was cut from the development budgets of Punjab (Rs706 billion), Sindh (Rs110 billion) and KP (Rs109 billion) - money that would otherwise have financed provincial schools, hospitals, and local infrastructure.

Given Pakistan’s fiscal constraints, cuts were inevitable, especially for water resource development after the unilateral suspension of the Indus Waters Treaty by India. The more important question is whether they should have come from the provinces or Islamabad. The answer becomes clearer once one looks at how the federal PSDP actually performs.

In FY26, the federal PSDP was initially approved at Rs1 trillion but later reduced to Rs800 billion under austerity measures. Even then, implementation lagged: only 52% of the revised allocation was utilised during the first ten months of the fiscal year, compared to 56% over the same period the previous year. This recurring pattern of approving more projects than the government can execute and rolling unfinished schemes into successive budgets has created a throw-forward liability of around Rs11 trillion, locking future budgets into old commitments instead of new priorities.

The real question, however, is whether this large federal budget should even exist in its current form.

The 18th Amendment fundamentally reshaped Pakistan’s Federation in 2010, devolving health, education, social welfare and several other sectors to the provinces. Seventeen ministries were formally devolved, with the expectation that corresponding functions, staffing and expenditure would follow.

Sixteen years later, that transition remains incomplete. Federal ministries continue to operate in constitutionally provincial sectors, creating parallel bureaucracies, overlapping mandates and competing development budgets alongside provincial departments. A World Bank assessment revealed that rationalising federal ministries and autonomous bodies in devolved sectors could save approximately Rs398 billion annually, equivalent to nearly 60% of the FY22 GDP (gross domestic product).

These are resources consumed by parallel institutions instead of service delivery. The International Monetary Fund (IMF) programme recognises this problem. The National Fiscal Pact under the Extended Fund Facility explicitly links federal right-sizing with completing the unfinished agenda of the 18th Amendment. Still, budget decisions continue in the opposite direction.

None of this suggests that Islamabad should withdraw from development altogether. Federal leadership remains indispensable for national highways, railways, inter-provincial energy transmission, water infrastructure and projects with nationwide spillovers. The Rs365 billion allocated to transport and communications in the FY27 PSDP is therefore defensible. The problem lies in social sectors where constitutional responsibility, financing and implementation already reside with the provinces.

Meanwhile, the federal government’s comparative advantage lies not in running provincial development projects but in managing the national economy. Macroeconomic stability, fiscal reform, debt management, investment policy, and external financing are responsibilities only Islamabad can perform. Yet these are precisely the areas where Pakistan continues to struggle.

The latest Economic Survey reflects the consequences of this imbalance. GDP growth remains at 3.7%, below the target of 4.2%; unemployment has risen to 7.1% from 6.3% a year earlier; and nearly three in ten Pakistanis continue to live below the poverty line.

The real issue, therefore, is not whether Pakistan spends enough on development. It is whether each tier of government is spending on the right things.

For sixteen years, Pakistan has tried to operate under a devolved Constitution with a pre-devolution bureaucracy. The result is predictable: provinces finance and deliver constitutionally assigned services with shrinking budgets, while Islamabad maintains overlapping institutions, underutilises its development budget, and competes for scarce fiscal resources.

Pakistan’s fiscal crisis stems not from a shortage of money, but from a lack of institutional discipline. Until the federal government aligns its spending with its constitutional mandate, no amount of reshuffling the PSDP will make development spending more effective. The question is not how much Islamabad spends, but whether it is spending where it still has a mandate to act.

The real question, however, is not whether collections reached another nominal high after downward revised target, but whether Pakistan today possesses a broader, fairer and more productive tax system than it had a year earlier.

Fiscal year (FY) 2025-26 is no exception. According to unofficial figures, FBR provisionally collected around Rs 13 trillion — the highest nominal collection in Pakistan’s history. Predictably, this has been projected as an extraordinary institutional achievement (sic).

These nominal collection figures, divorced from their economic context, actual revenue potential and accounting shenanigans, rarely reveal true performance of a revenue authority. They merely indicate the amount collected in current prices after taking undue advances and blocking bona fide refunds.

This has been the central theme of our writings in these columns on tax administration for over two decades. We have consistently argued that FBR should be evaluated not merely by gross collections but by the quality of revenue mobilisation, expansion of the taxpayer base, reduction in compliance costs, prompt payment of refunds, decline in litigation and contribution to economic growth.

A revenue authority exists to strengthen the economy, not merely to maximise annual collections through predatory extraction.

The revised estimates contained in the Annual Budget Statement 2026-27 tell a more revealing story than the official celebrations. The government itself revised the original FY 2025-26 FBR target downward from Rs 14.131 trillion to Rs 12.983 trillion before fixing the FY 2026-27 target at Rs 15.264 trillion—an increase of Rs 2.281 trillion or 17.57 percent over the revised estimate.

Direct taxes were revised downward from Rs 6.902 trillion to Rs 6.432 trillion, while indirect taxes were reduced from Rs 7.229 trillion to Rs 6.551 trillion. The revisions themselves demonstrate that the original assumptions proved unrealistic and that any fair assessment of performance must be made against existing realities, rather than aspirational targets, vis-à-vis actual tax potential at federal level.

Prom this perspective, the picture remains less impressive than official statements suggest. An independent Press report indicates that FBR still fell short of the International Monetary Fund (IMF) benchmark by Rs 975 billion, while every major tax head — income tax, sales tax, customs duty and federal excise duty — underperformed against expectations.

More importantly, revenue growth remained below the growth of the nominal economy. This means that a substantial part of the increase in collections resulted from inflation and expansion of nominal GDP rather than any significant improvement in tax administration or widening of the tax base.

There is another methodological weakness in the manner official performance is presented. The annual figure announced by FBR represents cash collected during the fiscal year, but cash collection is not synonymous with real revenue mobilisation.

A substantial part of the reported receipts comprises advance taxes (even not yet due) and withholding taxes relating to future tax liabilities, while at the same time bona fide refund claims—already determined under law—are often withheld beyond the statutory period.

Such timing differences inflate year-end collections without increasing the State’s real tax income and result in exaggerated targets for the next year. From an accounting perspective, they distort annual comparisons; from a constitutional perspective, they effectively compel compliant taxpayers to finance government operations interest-free and inflated payment to provinces under the prevalent Seventh National Finance Commission Award.

A modern revenue administration should be evaluated based on net revenue honestly earned after recognising accrued refund liabilities, not merely gross cash retained at the close of the fiscal year to appease the IMF at the cost fiscal discipline.

Equally important is the distinction between the country’s documented economy and its real economy. FBR’s enforcement machinery predominantly operates within the organised sector—corporate entities, banks, salaried persons, manufacturers, importers and large withholding tax agents.

Independent studies, including those of the Pakistan Institute of Development Economics (PIDE), consistently show that our informal or shadow economy constitutes a substantial proportion of national economic activity.

Although estimates vary depending upon methodology, they uniformly indicate that a significant share of production, trade and services remains outside the effective tax net. Consequently, each successive Finance Act extracts more from the same documented taxpayers while the vast untaxed segment of the economy continues to operate beyond meaningful taxation.

This is not tax broadening; it is tax concentration. The burden is repeatedly shifted onto those already visible to the revenue authorities rather than extending the tax net to those who remain outside. The tax base remains fundamentally narrow. Agricultural income taxation continues to produce insignificant revenues despite repeated legislative changes and FBR’s power to tax it where provincial income tax is not paid on it.

Large segments of wholesale and retail trade remain undocumented. Cash transactions dominate important sectors of the economy. Real estate continues to generate constitutional as well as administrative controversies. The digital economy remains only partially documented. Consequently, documented minority is forced to shoulder an increasing proportion of the national tax burden.

This distinction explains why record nominal collections can coexist with a persistently modest tax-to-GDP ratio. Inflation, currency depreciation and nominal GDP growth automatically increase tax receipts even where no genuine improvement in tax administration occurs.

The Chairman FBR has been celebrating collection in dollar terms of nearly US$46 billion, presenting it as an evidence of an unprecedented fiscal achievement (sic). Such claims may sound impressive in TV talk shows, press conferences and official presentations, but serious evaluation of tax administration requires looking beyond nominal figures and examining what lies beneath them. Pakistan’s GDP is officially projected to reach about US$452 billion for the current fiscal year. Thus, collection by FBR even in dollars terms will be 10.18% of GDP!

Ironically, while FBR leadership was congratulating itself, the World Bank downgraded its US$400 million ‘Pakistan Raises Revenue (PRR) Project’ from “Satisfactory” to “Moderately Satisfactory” because of poor progress in achieving its core objectives.

One of the most neglected indicators of institutional efficiency is the treatment of refunds. Delayed refunds artificially inflate year-end collections while simultaneously depriving exporters and other compliant taxpayers of working capital.

Such practices improve accounting statistics but weaken economic activity. No modern system of public finance can accurately portray net revenue without recognising legitimate refund obligations as liabilities of the State.

Since the Finance Minister and FBR leadership keep on mentioning success in dollar terms, international comparison also exposes the hollowness of their claims. Consider Finland. With a population of less than six million and a GDP of approximately €374 billion, Finland collected about €84 billion in taxes during 2025. Pakistan, with a population exceeding 250 million and immense untapped economic potential, rejoices tax collection equivalent to about US$46 billion while maintaining one of the lowest tax-to-GDP ratios among comparable economies.

The comparison is revealing. Finland does not achieve high revenue through withholding tax provisions, arbitrary notices, blocked refunds and coercive enforcement. It achieves revenue through broad-based taxation, high voluntary compliance, taxpayer trust, institutional credibility and an efficient welfare state.

Pakistan, by contrast, cheers gross collection while overlooking the indicators that truly reflect institutional efficiency. Despite record nominal collections, Pakistan relentlessly faces rising public debt, persistent fiscal deficits and increasing debt-servicing obligations [‘Debt accumulation & failed fiscal model’, Business Recorder, July 10, 2026].

Taxation cannot be evaluated independently of fiscal outcomes. If higher collections coexist with deteriorating public finances, the problem lies not merely in tax administration but in the overall fiscal model. Sustainable public finance cannot be built upon extracting more from the same taxpayers every year while leaving vast segments of the economy outside effective taxation.

Pakistan does not suffer from a shortage of taxation. It suffers from a shortage of taxable growth. Until fiscal policy shifts from extracting more from the documented economy to documenting more of the real economy, record collections will remain an accounting achievement rather than evidence of genuine fiscal reform.

This is the benchmark against which FBR’s performance should be judged—not by the size of the annual collection, but by the strength, breadth and sustainability of the economy that produces it.

Copyright Business Recorder, 2026

Currently, the direction is undesirably, showing an opposite trend, whereby not only is direct taxation much less than indirect taxation, the gap is also widening. Hence, against the budgetary estimate for FY26 for direct taxes at Rs 2.4 billion, revised estimate stood at only around Rs1.1 billion with budgetary estimate for the ongoing fiscal year for direct taxes was slightly increased to Rs.2.8 billion.

At the same time, budgetary estimates for indirect taxes for FY26 stood at Rs44.5 billion (which is 18.1 times more than budgetary estimates of direct taxes), while revised estimates are expected at Rs.37.5 billion (which is 35.8 times more than revised estimate of direct taxes), where budgetary estimate for FY27 for indirect taxes stood at Rs.51.5 billion (which is 18.2 times more than the budgetary estimate of direct taxes).

READ MORE: Reflections on provincial budgets FY27—III

Just like at the level of the Centre, at the stage of provinces, on one hand, the provincial budgets are indirect tax heavy, which are regressive in nature and, on the other, there has been a serious lack of ambitious direct tax expansion policies, especially given the rising challenge of meeting elevated level of resilience-, and overall greater welfare spending related needs that have, in turn, risen due to fast-unfolding climate change crisis, high inflationary pressures in the wake of recession-causing Covid-19 pandemic, the Ukraine War, and ongoing high level of commodity shock in the aftermath of the Middle East (ME) conflict, and practice of over-board austerity policies over the medium-terms, all likely enhancing inequality and deepening poverty.

Hence, in the case of Punjab, the total budgetary estimates for expenditure for FY27 at Rs 3.3 trillion, where current (non-development) expenditure stood at Rs 3 trillion, and around one-third of that is development expenditure, with its budgetary estimates at Rs.1.3 trillion.

READ MORE: Reflections on provincial budgets FY27—II

Moreover, budgetary estimates for subsidies for FY27 stood at Rs 67.2 billion, which is in fact less than the budgetary estimates for FY26, which stood at Rs 77.3 billion; where the revised estimates for subsidies were much less at Rs 41.8 billion.

At the same time, interest payments are more than subsidies for the last fiscal year, whereby budgetary estimates in this regard stood at Rs.70.1 billion, not to mention the fact that revised estimates of interest payments for the last fiscal year at Rs. 64.1 billion were much higher than the revised estimates of subsidies for FY26! This is strange, given the onslaught of the ME conflict, much elevated levels of prices of oil, and fertilizer calling for greater provision of subsidy for both consumption in general for the lower income groups, and also for farmers.

It is strange that, just like the federal government, the government of Punjab has practiced fiscal austerity even when subsidy needs are high. These high needs are due to both last year’s floods, and an ME-induced severe commodity shock.

The province is pursuing a primary surplus which, as per budgetary estimates for FY27, stood at Rs 1.63 trillion.

It needs to be indicated that as per revised estimates for FY26, primary surplus is expected to reach Rs511.3 billion. Moreover, even at a stage of depressed economic growth in the country and high subsidy needs, given the commodity shock in the wake of the ME conflict, and elevated level of poverty overall, the province has been running fiscal surplus!

At least, balanced budget needs to be pursued, with some reasonable level of allocations kept for contingency/shocks-related needs.

READ MORE: Reflections on provincial budgets FY27—I

Hence, according to the revised estimates for FY26, the budget balance stood at a positive Rs 447.2 billion, while the budgeted balance for FY27 reached a higher positive level of Rs 1.56 trillion.

Better domestic resource mobilization efforts at the federal and provincial levels, and greater rationalization of fiscal federalism, will overall reduce the need for provincial surpluses to cover the overall fiscal deficit at the federal level. Furthermore, shifting the tax composition away from regressive taxation will improve equity. Additionally, planning expenditures away from non-development spending will support greater productive and allocative efficiencies. This will have an overall positive impact on growth and, in turn, on revenue levels.

Here, it needs to be indicated that Sindh, on the other hand, has run budget deficit in both FY26 – where revised estimates indicated budget balance at negative Rs.455.1 billion, which was higher than budgetary estimates for the last fiscal year at Rs.336.1 billion – and FY27, where, as per budgetary estimate, budget balance stood at negative Rs.185.9 billion.

Although calculation for primary balance has not apparently provided, the author’s own calculations point out that unlike Punjab, the province has run primary deficit, whereby against the budgetary estimates for the last fiscal year at Rs.276.4 billion, revised estimates for primary deficit were much higher at Rs 454.9 billion, while budgetary estimate for FY27 stood at Rs 187.9 billion.

In the case of Balochistan, while the provincial government targeted reaching budget surplus for FY27, where budgetary estimates in this regard stood at Rs45.6 billion against the same budget surplus targeting for FY26 at Rs.51.8 billion, the revised estimates showed a budget deficit of Rs.95.8 billion.

Here, to the credit of the province, development expenditure saw an increase by around Rs 16 billion from the budgetary estimates at Rs.336.6 billion, while current expenditure saw a decrease by Rs.9.9 billion from the budgetary estimates at Rs.639.9 billion.

Having said that, what is unfortunate is that current expenditure has been budgeted for FY27 with a significant increase of Rs 167.9 billion over the revised estimates at Rs.630 billion for FY26. Additionally, it is sad to see that development expenditure budgetary estimates for FY27 have decreased by Rs 61.1 billion over the revised estimate at Rs 352.6 billion.

At the same time, as per the author’s calculations, the province ran a primary deficit of Rs 82.5 billion for FY26 based on the revised estimates, contrasting with the budgetary estimates that projected a primary surplus target of Rs 51.8 billion.

Moreover, just like FY26, the provincial government is targeting a primary surplus for FY27 of Rs.66.1 billion, which is concerning mainly because of the fact that Without serious efforts to raise taxes or cut non-essential costs, hitting this surplus will likely require the government to cut development spending.

Moreover, it is a shame that current (non-development) expenditure is around twice the amount of the development expenditure, where more specifically, budgetary estimates for current expenditure were 1.9 times the budgetary estimates for development expenditure for FY26, revised estimates for the last fiscal year for current expenditure was 1.8 times the revised estimates of the development expenditure, while this gap widens considerably over the last fiscal year, whereby, budgetary estimates for current expenditure are 2.7 times the budgetary estimates for development expenditure for FY27!

(To be continued on Sunday)

Copyright Business Recorder, 2026

Inflation has fallen sharply from the crisis-era highs. Foreign exchange reserves have improved. The current account is no longer under immediate pressure. The exchange rate has largely stabilized. For the first time in years, policymakers are discussing growth targets instead of emergency financing needs.

Viewed from that perspective, Budget 2026-27 represents a genuine achievement.

But it also raises an uncomfortable question. If the crisis has largely been contained, where will the next phase of growth come from? This is perhaps the most important question left unanswered by the budget.

The government deserves credit for restoring macroeconomic order. Fiscal consolidation is visible throughout the budget. Revenue collection targets have been raised, expenditure growth remains restrained and policymakers continue to pursue primary surpluses under the IMF programme. These are not small accomplishments for an economy that only a few years ago was confronting severe external financing stress and dwindling reserves.

Yet stability should never be confused with prosperity. A close read between the budget lines reveals that Pakistan remains trapped by the same structural constraints that have limited growth for decades.

Nothing illustrates this challenge more clearly than debt servicing.

Interest payments are projected at more than Rs8 trillion in FY27. That is not merely a large number. It is larger than the combined federal spending on development, health, education and several other growth-supporting functions. More than forty percent of federal expenditure will be consumed before the state builds a road, upgrades a school, invests in technology or expands productive infrastructure.

This leaves little room to finance the future.

The government has allocated Rs1 trillion for the Public Sector Development Programme. While sizeable on paper, it appears modest when viewed against the scale of investment Pakistan requires in energy infrastructure, water management, climate resilience, education, logistics and technology.

The dilemma is obvious. Fiscal stability has been achieved but the fiscal space required to accelerate growth remains limited.

Some encouraging signs are certainly emerging.

Large-scale manufacturing has returned to growth. Automobile production has surged. Cement, petroleum products and garments have posted stronger performance. Lower inflation and improved business confidence appear to be translating into higher economic activity after a prolonged slowdown.

But these improvements should be interpreted cautiously.

Much of Pakistan’s industrial recovery remains concentrated in a handful of sectors. Pharmaceuticals, chemicals, fertilisers and steel continue to face challenges. More importantly, much of manufacturing still depends heavily on imported raw materials and machinery. As economic activity strengthens, imports inevitably rise.

The budget’s own projections reflect this reality.

While GDP growth is targeted at around four percent, the current account deficit is expected to widen significantly during the coming fiscal year. Pakistan has experienced this pattern repeatedly. Growth picks up, imports accelerate, external pressures emerge and another round of stabilization follows.

That cycle has become one of the defining characteristics of Pakistan’s economic history.

Breaking it requires something the budget only partially addresses: a credible growth strategy.

There are positive signals. Support for IT exports continues. Tariff rationalization has begun. Measures aimed at reducing the cost of doing business suggest policymakers understand the importance of competitiveness. These are steps in the right direction.

But they do not yet amount to a transformation agenda.

Pakistan still lacks a clear roadmap for export diversification. Productivity growth remains weak. Industrial policy remains fragmented. Foreign direct investment remains concentrated in a few sectors rather than flowing into new areas of technological upgrading and value addition.

Most importantly, there is still no convincing answer to how Pakistan intends to grow at a pace sufficient to create jobs for its rapidly expanding workforce.

That is why Budget 2026-27 should be viewed less as a growth budget and more as a stabilization budget.

Its success lies in restoring confidence after years of economic turbulence. It has bought Pakistan time. The challenge now is deciding how that time will be used.

Stability was the destination during the crisis years. Today it is merely the starting point.

The next chapter will depend not on how effectively Pakistan manages its finances, but on whether it can finally build an economy that grows without repeatedly running into the same external and fiscal constraints that have held it back for decades.

Copyright Business Recorder, 2026

As defeated national teams pack their bags to head home, one nation remains silently ubiquitous despite its team never stepping onto the pitch. Nevertheless, it dictates the literal physics of every pass, every kick, and every goal.

As the finest players from all over the world battle for athletic dominance, the material object at the very heart of the tournament originates from the twelfth-largest city in Pakistan—Sialkot. This city is an unnoticed industrial powerhouse: a manufacturing hub that serves simultaneously as the world’s surgical instrument capital, a premier albeit surprising exporter of Scottish bagpipes, and the undisputed epicenter of global sporting goods.

Here, thousands of miles from the nearest World Cup stadium, Forward Sports has created the Trionda—the tournament’s official match ball. What a strange twist of fate: a country whose domestic football infrastructure is virtually absent from the world stage is the trusted source for crafting and assembling the most futuristic, sensor-embedded ball on Earth. Behind the star power of players like Mbappé, Messi, or Bellingham is a quiet foundation of Pakistani industrial engineering and craftsmanship. Every point on the scoreboard is delivered by a thermally bonded sphere engineered to track movement via a 500Hz internal motion sensor.

This chip enables the somewhat controversial automated VAR decisions—and was engineered by Adidas in partnership with tech firms in Munich, Germany. While Western labs claim the digital brain, it is the efficient assembly lines in Sialkot that give this marvel its physical form.

The tragedy of this global spectacle, however, is Pakistan’s own internal narrative or lack thereof. Caught in a cycle of national self-deprecation, Pakistanis have a habit of shrinking away from personal achievements, treating this significant contribution as a mere quirk of low-cost factory labour.

We look at the Adidas logo on the pitch and only see a foreign label, forgetting that the global icon relies on Pakistani craftsmanship to realize its most ambitious visions. It is time for a permanent shift in our collective psychology. Pakistan does not need a team on the pitch to claim ownership over this tournament.

We deserve to celebrate our involvement in this World Cup, just as loudly as the Norwegians with their row celebrations or the chanting Britons. We must learn to look at the Trionda not as a product we made for the West, but as a physical tribute to Pakistani genius. Every time the world’s greatest athletes strike that sphere, they are validating Pakistani skill, precision, and resilience.

Beyond the hard physics and high-tech sensors lies the tournament’s most profound, human triumph. A look at the production lines in Sialkot would show that the architects of this high-tech orb are increasingly Pakistani women.

In a society where economic independence for women is hard-won, the World Cup supply chain has become an engine of female empowerment.

Thousands of skilled women handle the meticulous engineering and quality control of the Trionda, about 15-20% of the total workforce. These women are rewriting their own financial destinies and dismantling stereotypes, one flawless sphere at a time.

Long after the final whistle blows in North America and a new world champion is crowned, Pakistan’s true victory will remain permanently etched into the literal fabric of this beautiful game. We put the “ball” in football, let’s own it.

Copyright Business Recorder, 2026

Most international organizations and global think tanks classify Pakistan as part of the South Asian group. However, in the recent past, the World Bank has officially reclassified Pakistan from its South Asia regional grouping to the Middle East and North Africa (MENA) region for financial and analytical reporting.

Pakistan is also a member of the Central Asia Regional Economic Cooperation (CAREC) and the Economic Cooperation Organization (ECO), indicating its active participation in multilateral collaboration with Central Asian countries.

The economic history of Central and South Asia is largely associated with the connectivity of trade and natural and human resources among the peoples of Central and South Asian countries. The “Silk Route” and the “Grand Trunk Road” (famously known as the “GT Road” in Pakistan and India) have been providing the major source of this connectivity. The direction of trade and the mobility of human resources in the Central Asian Republics were changed from South Asia to Eastern Europe during the Soviet regime. Now, visible signs of the revival of historical routes are strongly observed in the region.

This background justifies the supremacy and importance of Pakistan in connecting the three regional groups. This supremacy provides access to the Pakistani producers to the world’s largest markets, opportunities to attract foreign investment, and the development of a major hub of global connectivity and transit trade.

To achieve economic prosperity and social well-being through fast-track economic growth and development is a relatively easy task in this country, subject to economic governance and management. This strategic location, large domestic market, large markets in the neighboring regions, fertile land, and rich mineral resources support the planning and development strategies.

Despite these advantages, the country is facing severe economic challenges, including stagnant economic activities, lower GDP growth, a severe debt crisis, devaluation of currency, high interest rates, growing poverty and unemployment, and unpredictable high inflation rates.

To establish attractive and efficient connectivity among the regions is not only important from an economic point of view, but it is also influential for reducing political tension and regional disparities. Two prerequisites to establish efficient connectivity are:

• The construction of compatible infrastructure
• Easing the procedures and regulations for the cross-border movement of goods and services.

So far as construction of the compatible infrastructure is concerned, there are several projects in progress or under active consideration to connect the various countries in Central Asia, the Middle East, and Europe. One of those big projects is the ‘Trans-Asian Railway (TAR)’ project, which was initiated by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). The China-Pakistan Economic Corridor (CPEC), which is an integral part of the ‘Belt and Road Initiative (BRI)’ of China, is also an important component of regional integration between South Asia, Central Asia, and the Middle East.

The Central Asia Regional Economic Cooperation (CAREC) and the Economic Cooperation Organization (ECO) are also working on several mega projects to connect Central Asia and the Middle East. The Quadrilateral Agreement on Traffic in Transit (QATT), Islamabad-Tehran-Istanbul (ITI) Train Network, Trilateral Transit Trade Agreement (TTTA), Pakistan-Uzbekistan Transit Trade Agreement, Pakistan–Iran–Turkmenistan Commerce Cooperation (PITCC), Central Asia & South Asia (CASA) – 1000 energy corridor, Indus River Trade Corridor, North–South Transnational Corridor (Kazakhstan-Turkmenistan-Iran railway link),

Iran-Pakistan Pipeline, Turkmenistan, Afghanistan, Pakistan and India (TAPI) Pipeline, Trans-Iranian Canal, Europe-East Asia Economic Corridor, Europe-Mediterranean-East Asia Economic Corridor, Russian Federation-Middle East and South Asia Economic Corridor, Russian Federation-East Asia Economic Corridor, East Asia-Middle East and South Asia Economic Corridor, and Europe-Middle East and South Asia Economic Corridor are included in the major projects to connect the economic hubs in these regions.

Some of those are in active progress, and some have been inactive, amended, or closed because of geopolitical reasons. The construction of these corridors and logistic infrastructure is largely financed by international development finance institutions, including the World Bank, Asian Development Bank, and Asian Infrastructure Development Bank.

Several projects for the smoothness of goods and services, and people-to-people easy interaction have been considered or ratified by the participating countries. The ratification of the customs convention on the international transport of goods under cover of TIR Carnets (TIR Convention), the white card scheme to facilitate the drivers to travel across the boarders in the region, simplification of visa process in the participating countries, ECO free trade agreement to enhance the trade among the member countries (ECOTA), visa sticker scheme for the leading businessmen to allow them visa-free access in the participating countries, and the formation of ‘ECO Trade and Development Bank’ and the ‘ECO Insurance Company’ are the steps that are considered important for the enhancement in the relations of participating countries on the pattern of European Union.

However, careful strategies are required in Pakistan to regulate the procedures for adopting these powerful and game-changing policies. These strategies have dual objectives: (1) To facilitate the smoother cross-border movement of goods for the enhancement of trade (including transit trade), tax revenue, inflow of foreign exchange, and foreign investment, and (2) To prevent the illegal trade and ensure the security of domestic assets, resources, land, and people. To streamline the movement of goods, vehicles, and passenger traffic across borders with neighboring countries, the parliament legislated the Pakistan Land Port Authority (PLPA) Act 2025. One of the major purposes of this initiative is to modernize Pakistan’s external border, fostering legitimate trade and improving bilateral and transit trade with Afghanistan and the Central Asian Republics (CARs). Now, the Pakistan Land Port Authority (PLPA) is responsible for developing policies and acts as a coordinating entity for different government agencies involved in the cross-border trade facilitation.

An important aspect of the success and effectiveness of regional connectivity, free trade agreements, and bilateral treaties belongs to political relations, peace, and security conditions in the participating countries. Certainly, the finance and commerce ministries are very concerned with trade enhancement, tax revenue, and foreign exchange earnings. However, the role of the interior and foreign affairs ministries becomes much more important for the success and effectiveness of such bilateral and multilateral relations, while the transportation and communication departments play an important role. For this reason, the establishment of an autonomous authority was a fundamental requirement. This is a normal international practice. Notably, various agreements on regional integration have failed in various parts of the world because of the lack of coordination in the absence of an autonomous authority.

Despite a declining trend in the aggregate exports from Pakistan, it is a notable point that Pakistani firms are more export-oriented than the firms in other countries of the region. According to the latest available statistics, there are more than 8 percent Pakistani firms that export more than 10 percent of their product to the international markets. This ratio is 1 percent in the case of India, and 4 percent in the case of China. This is a strong indicator to believe that Pakistani firms are more export-oriented, and they have the capacity to earn more foreign exchange in the case of the availability of a big market and transit facilities. Certainly, the growth in their exports will be transformed into stock market growth, enhanced investment, the creation of employment opportunities, and other economic indicators.

Financial Indicators of Corporate Sector (2025)

(Percent of GDP, unless mentioned)

At present, Pakistan’s position is not bad in financial competitiveness. The lowest market capitalization as a percentage of GDP reflects that the market is still undervalued and there are bright chances of growth in the capital market, subject to growth in trade and production. This is an obvious indicator of the effect of growth in trade on the capital market. The higher market capitalization as a percentage of GDP in the Indian capital market than the world average may be an indicator of its saturation or bubble element. The weak area of Pakistan’s financial market is the much lower magnitude of the domestic credit, which is a reflection of fiscal imbalances due to inflation and mounting debts.

How much of the benefits of the connectivity and availability of a big market are transferred to the domestic private sector and business entrepreneurs? It largely depends on the size and competitiveness of the business sector. Simultaneous efforts and strategies are required to improve the competitiveness of the private sector. Certainly, fiscal and monetary reforms will be required in synchronization with smooth and liberal connectivity in trade.

Cotton illustrates this challenge more clearly than any other crop. Although Pakistan still cultivates around five million acres of cotton, annual production has fallen to nearly six million bales. Yet cotton remains the backbone of the country’s textile industry and the principal source of raw material for export-oriented manufacturing. During a single cotton season, private-sector business generated through seeds, fertilizers and crop protection products is estimated at between

Rs150 and Rs220 billion. Given the enormous commercial value of the sector, a legitimate question arises: How much of this value is being reinvested in improving farmers’ productivity through research, soil testing, efficient water management, modern seed technologies and scientific extension services?

The issue extends beyond cotton alone. The crop accounts for nearly one-quarter of Pakistan’s fertilizer consumption, while a significant share of crop protection products is also applied to cotton. A continued decline in cotton production would therefore affect not only farmers but also the industries whose long-term growth depends upon a productive farming sector. Farmer prosperity is not simply a social objective. It is an economic necessity.

Many of the world’s leading agricultural economies have already recognized this principle. In countries such as the United States, Brazil and Australia, private agricultural companies increasingly complement public research by investing in farmer education, demonstration plots, digital advisory services, precision agriculture and long-term technology transfer. Their commercial success is linked not only to product sales but also to improvements in productivity, resource efficiency and farm profitability.

Pakistan presents a different picture. Private companies actively organize seminars, field days and farmer conventions, yet many of these initiatives understandably focus on promoting individual products. As a result, farmers often receive fragmented recommendations instead of integrated, science-based crop management strategies that improve overall profitability. This is not a criticism of individual companies; it reflects a structural gap within the agricultural support system.

The sugar industry provides a useful comparison. Sugar mills maintain continuous engagement with growers because their business depends upon a reliable supply of quality cane. They invest in extension services, technical guidance and improved production practices. Cotton deserves a similar long-term partnership involving the textile industry, seed companies, fertilizer manufacturers, crop protection firms and public research institutions.

The broader issue is how success is measured. Corporate performance in Pakistan’s agricultural sector continues to be judged largely by sales volumes and market share. These indicators remain important, but they should not be the only benchmarks. A farmer who cannot earn a reasonable profit will eventually reduce investment in quality seed, balanced fertilization, improved technologies and crop protection. In the long run, weakened farmers translate into weakened markets for agricultural businesses. Pakistan therefore needs to redefine agricultural success through a practical policy framework.

First, major agricultural companies should adopt measurable Farmer Impact Key Performance Indicators (KPIs) alongside their commercial targets. Their performance should be evaluated not only through sales but also through measurable improvements in farmers’ yields, production costs, climate resilience and net farm income.

Second, the private sector should establish structured partnerships with public agricultural research institutions and extension organizations. Such collaboration would combine scientific research with private-sector outreach, enabling farmers to receive integrated, evidence-based agronomic advice rather than isolated product recommendations.

Third, Pakistan should gradually introduce a voluntary Farmer Income Impact Reporting Framework. Major agricultural companies could publish annual assessments explaining how their technologies, advisory services and farmer support programs have influenced productivity, production costs, resource-use efficiency and farm profitability. Such reporting would encourage transparency while promoting healthy competition based on farmer outcomes rather than sales alone.

Ultimately, Pakistan’s agriculture requires more than additional investment. It requires a different way of measuring success. Farmers should no longer be viewed merely as customers but as long-term business partners whose prosperity determines the future of the entire agricultural economy. A resilient farming community strengthens companies, improves national food security and supports sustainable economic growth. The real measure of success, therefore, is not how much the agricultural industry sells, but how much it enables farmers to earn.

After all, uncertainty usually breeds caution. This time, it seems to be producing certainty.

Could that be the biggest warning of all?

The debate surrounding artificial intelligence has become increasingly polarised. On one side stand the optimists, convinced that AI represents a technological revolution comparable to electricity, the internet or the smartphone. Trillions of dollars in investment, they argue, will ultimately generate productivity gains and profits large enough to justify today’s extraordinary valuations. On the other are those who believe investors have become so captivated by the promise of AI that they are no longer asking whether the returns can possibly justify the spending.

The remarkable thing is that both camps have become more confident at precisely the moment the evidence has become less conclusive.

Nobody possesses an AI playbook, after all. No historical model can tell us how quickly businesses will adopt the technology, whether expensive proprietary models will retain pricing power, how much cheaper open-source alternatives might become or what the eventual winners will look like. Yet instead of becoming more cautious as the unknowns multiply, markets appear to be digging in.

How often does uncertainty strengthen conviction rather than weaken it?

Perhaps the answer lies in the sheer scale of the numbers involved.

Corporate America is now spending amounts on artificial intelligence that would have seemed unimaginable only a few years ago. Data centres are expanding at breath-taking speed. Semiconductor manufacturers continue racing to meet demand. Every earnings season brings fresh announcements of larger capital expenditure budgets.

Yet another set of numbers deserves equal attention.

Much of that investment is now being financed by companies whose own free cash flows are coming under increasing pressure. The largest technology firms continue pouring hundreds of billions of dollars into AI infrastructure while relying more heavily on debt and equity markets to finance the buildout. Meanwhile, much of the immediate financial benefit appears to be flowing elsewhere, particularly toward semiconductor manufacturers supplying the chips powering this revolution.

Could both sides of that equation continue working indefinitely?

Perhaps they can. Transformational technologies have always required enormous upfront investment before delivering widespread economic returns. Railways did. Electricity did. The internet certainly did.

History, however, also offers another lesson.

Technological revolutions and speculative episodes have often arrived together. One does not necessarily invalidate the other. The internet transformed the global economy even as the dotcom bubble destroyed billions of dollars of wealth. Genuine innovation and financial excess have never been mutually exclusive.

That is where today’s market becomes particularly interesting.

AI-related investment now accounts for an unprecedented share of new corporate capital expenditure in the United States, while investment elsewhere in the economy has slowed noticeably. In other words, corporate America appears to be making an increasingly concentrated bet on one technology, one narrative and, ultimately, one set of future assumptions.

Is that confidence or concentration risk? Markets are beginning to ask the question in their own language.

Volatility has returned.

Some of the largest companies sitting at the centre of the AI story have experienced unusually sharp price swings in recent weeks. Semiconductor stocks that only months ago appeared almost incapable of falling have suddenly reminded investors that momentum works in both directions. South Korea’s chip-heavy KOSPI has endured some of its largest declines since the global financial crisis, driven largely by sharp moves in semiconductor shares. Individual technology stocks are experiencing levels of volatility that would have seemed extraordinary during the earlier stages of this rally.

Perhaps volatility is trying to tell us something that conviction refuses to hear.

Markets generally become volatile when investors disagree about value. That disagreement appears to be widening rather than narrowing. Every earnings report, every capital expenditure announcement and every shift in demand for AI infrastructure is now interpreted as decisive evidence by whichever side already holds the stronger opinion.

Could markets have become less interested in discovering the truth than in defending existing beliefs?

That may be the real paradox.

The deeper uncertainty becomes, the stronger both narratives appear to grow.

If that trend continues, volatility may become less of an exception and more of a permanent feature of the AI trade. Large swings cease to be signs of panic and instead become the mechanism through which markets gradually discover what these businesses are actually worth.

For countries such as Pakistan, this debate might appear comfortably distant.

It is not.

Pakistan may not manufacture advanced semiconductors or build hyper-scale data centres, but it remains deeply exposed to shifts in global financial conditions. A sharp correction in the world’s most crowded trade would not remain confined to Silicon Valley. It could tighten global liquidity, strengthen the dollar, widen risk premiums and reduce capital flows into emerging markets. History suggests that when global investors become nervous, they rarely distinguish carefully between different emerging economies before reducing exposure.

That is precisely why developments on the Wall Street deserve attention in Islamabad.

The question is no longer whether artificial intelligence will change the global economy. It almost certainly will.

The more difficult question is whether financial markets have already priced decades of future success into today’s valuations while the underlying economics remain stubbornly uncertain.

Perhaps the optimists will be proved entirely right. Perhaps today’s investment boom will produce productivity gains that dwarf every previous technological revolution. Perhaps current valuations will eventually look remarkably cheap.

Or perhaps future historians will conclude that markets correctly identified the next great technological transformation while simultaneously mispricing almost everything associated with it.

Would that really be the first time investors managed to be right about the future and wrong about the price?

Copyright Business Recorder, 2026

This is not an abstract issue for the writer. I was employed by BHP Billiton on the Iran-Pakistan-India/Iran-Pakistan pipeline project for several years and later served as a director of Interstate Gas Systems. I saw the project through its commercial, political and technical cycles. My assessment, based on that involvement and the public record now available, is that the project was ultimately signed on an unaffordable pricing formula and without the level of independent commercial advice, price-risk assessment and due diligence that a transaction of this scale required.

That background matters because the dispute should not be reduced to a simple line: Iran built its side, Pakistan did not build its side; therefore, Pakistan must pay whatever figure is now claimed. That is not how a serious damages analysis works. Iran may have a claim to argue. It does not follow that it has an entitlement to the full amount being floated in public debate.

The public record says the 2010 pipeline agreement envisaged supply of 750 million to one billion cubic feet per day for 25 years from South Pars to Pakistan. The route was reported at about 1,900 kilometres, with roughly 1,150 kilometres in Iran and 781 kilometres in Pakistan. Iran says it invested about US$2 billion in its section and made it ready to export. Local media figures cited in Reuters reporting have put Pakistan’s possible exposure as high as US$18 billion.

Those facts are relevant. They are not conclusive. For a damages claim, the central question is not whether Iran laid pipe. The central question is whether Iran could have delivered the contracted gas, whether Pakistan’s delay caused Iran an actual net economic loss, and whether the claimed investment was genuinely stranded by Pakistan rather than used for Iran’s own domestic gasification programme.

Readiness is more than a pipeline

Iran’s strongest public argument is that it completed infrastructure on its side. But pipeline readiness is not the same as commercial readiness. A seller claiming damages for non-offtake must show not only a completed transmission route but firm gas availability at the contractual delivery point.

That is where Iran’s claim becomes vulnerable. Iran has huge gas reserves, but reserves underground are not the same as exportable supply. South Pars is not a spare export reservoir; it is the backbone of Iran’s domestic energy system. Recent reporting has noted that South Pars accounts for the majority of Iran’s gas production, while Iran consumes most of its gas internally. Reuters reported that Iran’s gas production in 2024 was 276 billion cubic metres and that 94 percent was consumed inside Iran. It also reported that sanctions and technical constraints have meant most South Pars gas is used domestically.

Iran’s winter shortages are not occasional anecdotes. They are structural evidence. Government offices and schools have been closed during cold spells because of gas shortages. Power cuts and fuel switching have followed gas scarcity. These facts raise a direct question: during the period for which Iran claims loss, did Iran actually have firm incremental gas available for Pakistan; or did it need the same molecules for its own households, power plants, industry and reinjection requirements?

A claimant cannot rely on headline reserves and ignore operational deliverability. If Iran’s gas system was short in winter, if South Pars was under pressure, and if exports to existing customers were interrupted or reduced during periods of domestic stress, then Pakistan is entitled to require strict proof that the gas for Pakistan was available, processed, transportable and not required domestically.

The Iranian line was not an export-only stranded asset

A second major weakness in Iran’s damages narrative is the assumption that its pipeline expenditure was made solely for Pakistan and became stranded because of Pakistan. That proposition is too broad.

Global Energy Monitor identifies IGAT-7, Iran Gas Trunkline-7, as an operating Iranian pipeline that transfers South Pars gas to Hormozgan, Sistan, Baluchestan and Kerman provinces. It lists IGAT-7 as operational from 2010, with capacity of about 1,800 million cubic feet per day, and as part of Iran’s own gas trunkline network. This is critical. The same infrastructure Iran points to as evidence of performance also served Iran’s domestic objective of bringing South Pars gas to south-eastern Iran, including Iranian Balochistan.

The argument is not that the IP project was never discussed as an export pipeline. It plainly was. The point is narrower and legally stronger: Iran cannot automatically convert the full cost of a domestic trunkline serving Iranian provinces into Pakistan-caused damages. Any credible damages calculation must separate export-specific incremental cost from domestic-use infrastructure that Iran needed and used for its own national gas grid.

If an asset has domestic utility, it is not fully stranded. If it carries gas to Iranian provinces, its cost cannot simply be shifted to Pakistan. Iran would need to prove what portion of expenditure was exclusively incurred for Pakistan, what portion served domestic purposes, and what value Iran obtained from that infrastructure after Pakistan’s delay.

South Pars investment needs undermine the export-surplus assumption

Iran’s own investment plans further weaken a simple damages case. S&P Global reported in March 2025 that Iran had signed a US$17 billion contract with domestic companies to boost pressure in South Pars, following a difficult winter in which Iran had to cut off power to household and industrial users because of gas and fuel shortages. The same report described the need for 56 high-capacity compressors across seven pressure-boosting hubs.

Columbia University’s Center on Global Energy Policy has described Iran’s gas position as a paradox: vast resources but limited export capacity. It notes that Iran’s ability to expand supply is constrained by lack of access to compression equipment, pressure maintenance and enhanced recovery technologies, and that Iran has also pursued arrangements to import gas from Russia, signalling concern over production capacity and seasonal adequacy.

Those facts matter for causation. If Iran requires very large pressure-boosting investment to sustain South Pars output, then the existence of a contractual export obligation to Pakistan does not prove deliverability. A damages model based on assumed uninterrupted export volumes must be tested against reservoir pressure, processing capacity, seasonal demand, reinjection needs and actual export performance.

Damages cannot be a political figure

The reported US$18 billion figure is therefore not self-proving. It should be treated as a claim requiring detailed evidence, not as a debt. Iran would need to disclose the legal basis of the claim, the damages clause, the claimed period, the volumes allegedly available, the price assumptions, the cost of production, avoided costs, domestic use of the gas, alternative sales or swaps, and the value of the domestic pipeline network created on its side.

Gross contract revenue is not damages. Nor is the full cost of a multi-purpose trunkline automatically recoverable. The legally tenable test is net loss caused by Pakistan’s breach, after mitigation and after accounting for Iran’s own use of the infrastructure and gas. If Iran consumed the gas domestically, avoided shortages, reduced power cuts, supplied industry, supported petrochemicals or used the gas to serve its own provinces, that value must be credited. If the pipeline infrastructure was part of IGAT-7 and served domestic Iranian needs; that must also be credited.

Pakistan should also challenge any attempt to treat mechanical completion as conclusive performance. Commercial performance requires gas, pressure, processing capacity, metering, delivery readiness and sustained ability to supply. Iran’s domestic shortages, its South Pars pressure-maintenance requirements and its export interruptions are all relevant to whether it could have performed as claimed.

There is also an uncomfortable history on the Pakistani side. The pricing formula was not a minor detail. It was the project. A pipeline carrying unaffordable gas is not an energy asset; it is a fiscal liability. In my assessment, the agreement was signed without sufficient independent scrutiny of the pricing formula, long-term oil linkage, deliverability risk, infrastructure utility, and downstream consequences. That failure should be acknowledged. But it does not transform Iran’s entire headline claim into proven damages.

Pakistan’s line should be evidence, not emotion

Pakistan should not approach this issue with slogans, nor with panic. It should approach it as a commercial and evidentiary dispute. The questions are precise: What gas was available? What volumes were deliverable? What costs were avoided? What domestic value did Iran obtain? What part of IGAT-7 was export-specific? What part was domestic grid expansion? What was the actual net loss?

Iran can say Pakistan delayed. Pakistan can respond that damages require proof. The strongest defence is not denial. It is disciplined fact. Iran’s own domestic shortages, South Pars decline pressures, need for major pressure-boosting investment, winter import and swap arrangements, export curtailments, and domestic utility of IGAT-7 all weaken a claim framed as a simple Pakistan-caused loss.

The correct conclusion is narrow but powerful. Iran may have a contractual grievance. It does not have an automatic entitlement to a headline damages number. Any settlement, arbitration strategy or diplomatic negotiation must insist on strict proof of exportable gas availability, export-specific sunk cost, actual net loss and mitigation.

Pakistan should not concede a damages claim built on political arithmetic. A claim of this size must be tested molecule by molecule, asset by asset and dollar by dollar. On the public facts, Iran’s position is far less straightforward than the headline suggests.

Copyright Business Recorder, 2026

The answer lies not in abandoning conventional fertilizers that have served us well, but in embracing their next evolution: Enhanced Efficiency Fertilizers (EEFs). These innovative products are designed to release nutrients in accordance to plant demand for their better uptake.

Studies have shown that approximately half of the applied nitrogen and phosphorus are lost through leaching, volatilization or soil fixation. To a farmer, who is using fertilizer, which is valued at 50,000 per season this is an unrealized value money spent but fails to be used to produce a product. If we multiply this by Pakistan’s 22 million hectares of cultivated land the economic impact becomes staggering. On the other hand, the environmental impact is also of similar importance: surplus of nutrients that enter water bodies and the atmosphere cause ecological stress, impacting both ecology and sustainability of agriculture.

Enhanced efficiency fertilizers are not a single product, but a family of innovative technologies designed to ensure that the nutrients reach the plants at the right time and in the right amount. These are controlled/slow release fertilizers coated with polymers, micronutrients or other materials; stabilized fertilizers treated with urease or nitrification inhibitors to minimize nutrient losses and nano- or microbial-based formulations. The coating technology creates a physical barrier which decomposes gradually in soil and results in the release of the nutrients through controlled microbial action, hydrolysis and photolysis instead of being directly dissolved. Economic benefits of these fertilizers are substantial. Field studies showed that farmers can reduce application rates by 20-30 percent while maintaining or even improving yields. The global EEF’s market valued at USD 2.37 billion in 2018 is projected to reach USD 3.86 billion in 2026, a 6.37 percent annual growth rate reflecting worldwide recognition of these benefits.

Agronomic advantages extend beyond nutrient efficiency. EEFs prevent the high local salt concentrations that conventional fertilizers sometimes create near application sites, reducing osmotic stress and seedling damage. This is particularly valuable during establishment phases when young plants are most vulnerable. Environmental benefits align with Pakistan’s sustainability commitments as well. Reduced nutrient losses mean less contamination of water resources and lower greenhouse gas emissions from nitrogen volatilization.

Although the market is evolving, several EEFs have already entered the Pakistani agricultural market. The most used formulations are zinc-coated urea, which simultaneously mitigates nitrogen and zinc deficiency, neem-coated urea, with natural compounds which resists nitrogen loss and urea treated with synthetic nitrification inhibitors for regulated nitrogen release. Additionally, biofertilizer-coated formulations combining beneficial microorganisms with conventional nutrients are also gaining attention. Despite their potential, the implementation of these innovative products in Pakistan is constrained by elevated initial costs, little farmer awareness and insufficient local production.

This gap must be filled by offering policy incentives and subsidies or tax incentives on the production and adoption of EEFs and to the greatest extent to small holder farmer who has the highest financial constraints. The local production can be accelerated with the help of public-private partnerships. Pakistan’s fertilizer industry has shown its ability to produce the world-class products. By means of the proper incentives and technology transfer schemes, the cost can be minimized in the production of EEFs, while creating high-value manufacturing job opportunities.

Transferring knowledge is equally important. Agricultural extension services need to be prepared to use field tests in rural communities to show the advantages of EEFs. Adoption happens naturally when farmers observe that nearby plots are producing the same results but using 20 percent less fertilizer. The training programmes should target the progressive farmers since they will be able to act as local champions of the technologies. Applying the proper fertilizer at the appropriate rate, at the right time, and in the right location is crucial for sustainable agricultural intensification in Pakistan, as has always been discussed by agricultural experts. Perhaps the most realistic approach to realize this goal is through EEFs especially for crops like maize where yield gaps are still significant.

For agricultural sector of Pakistan, EEFs offer a way out to deal with the dual challenge of feeding a growing population while managing environmental resources responsibly. They are not only a marginal increase, but a fundamental rethinking of how we deliver nutrition to crops. Whether or not Pakistan will use enhanced efficiency fertilizers is not the question; rather, it is how soon we can make them available and reasonably priced for the farmers who need them the most.

Copyright Business Recorder, 2026

A sale is not the same thing as a success. The distance between the two is where most Pakistani privatisations have come to grief.

On 30 June 2026, management control of Pakistan International Airlines passed to PIA Equity Limited, a special purpose vehicle formed by the consortium led by Arif Habib Corporation. After three decades of attempts — promised, relaunched, abandoned across governments of every complexion — a Pakistani government has actually sold a major state-owned enterprise. This time, it happened.

That deserves recognition. It also deserves scrutiny.

A blueprint worth studying

The right way to understand this transaction is not as a sale but as rehabilitation. PIA was not simply auctioned off. It was surgically repaired first.

Over Rs 600 billion of legacy debt and pension liabilities were carved out into a separate holding company, so the airline could be handed to private management as a clean entity — a debt-light balance sheet, positive equity, and irreplaceable global traffic rights to 97 countries rather than the accumulated baggage of decades of mis-governance. Tax credits of Rs 36 billion were granted, over Rs 33 billion of FBR and CAA liabilities rescheduled, and the 18 percent sales tax on aircraft leases waived. The European Union and United Kingdom had already lifted their flight bans, restoring access to the markets that matter most.

The contrast with the previous attempt tells the story. In October 2024, the government’s first effort collapsed when a single qualified bidder offered Rs 10 billion against a minimum expectation of Rs 85 billion; less an auction than an embarrassment. Fourteen months later, the same asset drew a genuinely competitive contest: a consortium led by Arif Habib Corporation — with Fatima Fertiliser, City Schools, Lake City Holdings, and AKD Group — bid Rs 135 billion for a 75 percent stake, edging out the Lucky Group by Rs 1 billion in the thirteenth round. Three bidders cleared the Rs 100 billion reference price.

What changed was not the airline. It was the discipline of preparation. Isolate past failures through a holding structure. De-risk the asset to attract credible capital. Bind investors to performance and fleet growth. This is the philosophy strategic privatisation requires — for airlines, banks, and power distribution companies alike. The Privatisation Commission operated here as a restructuring-and-value platform, not a simple auction house. That should become the norm.

Where the money goes

The most instructive feature of the transaction is where the money goes. Of the Rs 180 billion total commitment, Rs 125 billion is injected back into PIA as fresh equity. Only Rs 55 billion goes to the government — Rs 10 billion at First Closing, and Rs 45 billion at Second Closing within twelve months.

This is the opposite of the instinct that has wrecked previous privatisations. The tempting move is always to maximise the cash the exchequer collects on sale day. But a distressed enterprise sold for maximum upfront cash and then starved of capital tends to remain distressed — now under private ownership, and still leaning on the state. That, in one sentence, is the K-Electric story. Directing 92.5 percent of the bid value back into the airline is the right call: divestment as a tool for value creation, not cash extraction.

The sponsors are a marked improvement on precedent. Arif Habib, Fatima Fertiliser, and Fauji Fertiliser (who joined the consortium after the auction) are established groups with credible balance sheets and reputations to protect. This is not the 2005 KESC sale, where the winning bid came from a virtually unknown Saudi entity and control ended up, by a route never publicly explained, with an offshore company in the Cayman Islands. This time, the country knows who owns its airline.

One flaw in an otherwise sound design

Here is where the applause should pause — not because the structure was wrong, but because it stopped one step short.

The Privatisation Commission did the hard, value-creating work. It separated Rs 600 billion of legacy liabilities, cleaned the balance sheet, and channelled Rs 125 billion of the sale proceeds back into the airline as fresh equity. In economic substance, this is public capital. Having manufactured a clean, recapitalised, upside-rich airline, the government then gave away the entire upside. I would like to raise a simple question for the Privatisation Commission regarding the capital injection of Rs 125 billion: will this amount be credited as the consortium’s equity, or as the government’s?

At First Closing the state retained 25 percent. But the consortium has already exercised its option to acquire that residual stake for Rs 45 billion at Second Closing. Once that completes, the government will hold no equity, appoint no directors, and share in none of the recoveries it spent years making possible. If PIA becomes the competitive carrier this transaction is designed to build, every rupee of gain will accrue to private shareholders — on the back of Rs 125 billion of public money and a state-funded rehabilitation. Retaining even a minority stake with proportionate board representation would have let the public share in the value it created, and kept a set of eyes inside the enterprise.

Which raises the harder question. What does the Share Purchase and Subscription Agreement (SPSA) actually require the new owners to do with the Rs 125 billion? Are there binding milestones for fleet renewal and route expansion? Limits on related-party transactions, on dividend distribution, on procurement that could drain the capital without building anything? Reporting obligations that let the Privatisation Commission and the public see where the money goes? These provisions are the difference between Rs 125 billion of public investment and Rs 125 billion of public subsidy. Whether the SPSA contains them has not been disclosed.

The K-Electric experience is the cautionary tale. Governments placed directors on that board for years and still failed to protect the public interest — the nominations were not merit-based, the directors lacked independence, competence, and institutional support. Board seats alone do not guarantee protection. Safeguards must be structural, contractual, and competently enforced. All three together.

A beginning, not a verdict

The preparation was disciplined. The bidding was genuinely competitive. The sponsors are credible. The proceeds are pointed at recapitalisation rather than extraction. This is the strongest major privatisation Pakistan has executed in nearly twenty years, and a direct rebuttal to those who insist the country is incapable of reform.

But privatisation does not end when the SPSA is signed; it actually begins. Whether PIA becomes a competitive airline depends on what the consortium does with the money, whether the fleet and route commitments materialise, and whether the state retains the institutional capacity to hold the new owners to their word. Every failed Pakistani privatisation began with optimism. What separated the failures from the successes was what happened after the closing.

The PIA transaction has earned the right to be called a beginning. Whether it earns the right to be called a success is a question for the years ahead — and one the remaining articles in this series will help frame.

Copyright Business Recorder, 2026