Ikramul Haq

The central conclusion of this series is straightforward. Pakistan does not suffer from a shortage of taxes. It suffers from a

Four days before Budget 2026–27, policymakers should revisit a lesson understood by Ricardo, Smith, Mill and George long before the emergence of modern taxation systems. A state seeking fiscal justice should tax wealth arising from privilege before taxing income arising from effort. Pakistan's budget debate would become far more meaningful if it began with that principle. The message to policymakers is therefore simple: Tax agricultural rent of absentee landowners, not farmers.

Only “agricultural income” as defined in the Constitution falls within the legislative competence of the provinces, while all other activities of the agriculture sector (livestock, poultry, forestry, horticulture, cattle farming, fish farming, etc.)...

The conventional narrative treats fiscal deficit as proof that citizens are not paying enough taxes. The evidence points

Development shrinks when productive transformation is absent

The authorities sent 6 amendments to SOE-dedicated laws to parliament in January 2026 for approval. They now need to progress with the remaining 3 SOEs with dedicated laws (end-August 2026 SB). The authorities have also finalized and will soon submit draft SWF Law amendments to parliament. These amendments clarify the legal mandate of the SWF as a holding company, strengthen SWF governance, ensure that SWF-owned SOEs remain under the same high-quality governance structures and accountability standards as all other SOEs, require transparent and competitive procedures for divestment and procurement, and introduce key fiscal safeguards (MEFP 36b). The adoption of these amendments (end-March 2026 SB) without further delay is essential to maintain reform momentum. The operationalization of the SWF will remain on hold until these legal changes are enacted—IMF Country Report No. 26/101 – Page 21 State-Owned Enterprises (SOEs) have long occupied a dominant place in Pakistan’s economic landscape. These entities were established to support industrialization, develop critical infrastructure, address market failures, and provide essential public services, to serve both economic and strategic objectives. Their footprint extends across energy, transportation, telecommunications, financial services, manufacturing, hospitality, and numerous other sectors where ownership or control rests with either the federal or provincial governments. Beyond their commercial functions, SOEs have played an important role in employment generation, revenue creation, and the delivery of public services considered essential for national development. According to the latest Consolidated SOE Position released by the Ministry of Finance, the country currently has approximately 212 SOEs operating across various sectors of the economy. These comprise 88 commercial SOEs, 55 non-commercial SOEs, including companies established under section 42 of the Companies Act of 2017, non-profit organizations, trusts, and universities, as well as 69 subsidiaries of commercial SOEs. The commercial SOEs, which form the primary focus of financial and operational performance assessments, operate across a broad range of sectors including power, oil and gas, infrastructure, transport and communications, manufacturing, mining and engineering, finance, industrial estate development and management as well as wholesale, retail, and marketing. The scale of these enterprises remains significant. SOEs continue to maintain a dominant market presence in key sectors such as power generation and distribution, energy, aviation, and railways. During fiscal year (FY) 2024-25, the combined revenues of all SOEs stood at approximately PKR 12.4 trillion, whereas the book value of their assets reached PKR 37.9 trillion. Despite this substantial asset base and market presence, financial performance continues to be a matter of concern. Commercial SOEs collectively recorded net losses of PKR 122 billion during FY2024-25, representing a sharp deterioration from the PKR 30.64 billion net losses reported in FY2023-24. This increase of nearly 300% highlights the growing financial pressures facing several public-sector entities. The silent decline of local sport sector The Mediator’s Moment Tax expenditure & myth of fiscal deficit—II The hidden budget of the elite Overseas Kashmiris call for peace, unity and constructive engagement The power sector remains particularly prominent within the SOE landscape. It accounts for the largest number of independent commercial SOEs, with 24 entities, and holds the largest share of assets within the overall SOE portfolio, amounting to more than PKR 7.8 trillion. The aggregate revenues across the SOE sector also weakened during the year. The total revenues declined from PKR 13.52 trillion in FY2024 to PKR 12.4 trillion in FY2025, reflecting a contraction of more than PKR 1 trillion, or approximately 8%. Though the declining revenues are concerning, a closer examination of profitability trends reveals deeper structural challenges. Historically, SOE performance has often been assessed through the distinction between profit-making and loss-making entities. Even among the traditionally profitable segments, performance weakened considerably during FY2025. The aggregate profits generated by profit-making SOEs declined to PKR 709.9 billion, compared to PKR 820.7 billion in FY2024, representing a 13% reduction. This trend is particularly concerning because it suggests that even entities that have historically generated profits are facing increasing operational and financial pressures. According to the report, the decline was driven by a combination of rising operating costs, delayed tariff adjustments, and subdued commercial data. Profitability within the sector also remains highly concentrated. More than 50% of total profits generated by profit-making SOEs originated from only four entities: Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), National Bank of Pakistan (NBP), and WAPDA. On the other side of the ledger, aggregate losses incurred by loss-making SOEs showed only marginal improvement. The total losses declined from PKR 851.4 billion in FY2024 to PKR 833 billion in FY2025, representing a reduction of just 2%. Though this may appear to be progress at first glance, the underlying structural weaknesses remain largely unchanged. An annual loss of PKR 832.8 billion translates into approximately PKR 3 billion in losses every single day. Such losses highlight the urgent need for structural reforms and the resolution of long-standing issues including overstaffing, pricing distortions, weak governance, and operational inefficiencies. Similarly, losses are also concentrated among a small number of entities. The combined losses of the four largest loss-making SOEs accounted for approximately 67% of the total losses across the SOE portfolio during FY2024-25. These entities include the National Highway Authority (NHA), Quetta Electric Supply Company (QESCO), Peshawar Electric Supply Company (PESCO), and Pakistan Railways. The fiscal burden associated with sustaining SOEs also continued to grow. During FY2025, total government support to SOEs increased to PKR 2,078.5 billion, compared to PKR 1,512.9 billion in FY2024, representing a 37% increase. The growth in fiscal support was driven primarily by higher equity injections, increased government lending, and expanded sovereign guarantees. The equity injections alone reached PKR 728.9 billion during FY2025. A significant portion of this support was associated with the one-off clearance of circular debt within the power sector and payments made to Independent Power Producers (IPPs). These transactions were reflected as equity injections intended to strengthen the financial position and balance sheets of key state-owned entities. Government lending also increased substantially. The loans extended to SOEs rose by 34%, increasing from PKR 263.3 billion in FY2024 to PKR 354.1 billion in

Fiscal responsibility requires transparency on both sides of the ledger. Without it, the discussion on deficits becomes less an

The solution lies not in higher rates or additional levies but in rationalising tax expenditures, taxing untapped economic

Pakistan has lived too long under the myth that deficits are unavoidable. The evidence examined in this series points to a

he more difficult question is whether meaning can be found solely within the self, or whether it also requires understanding