KARACHI: Mian Zahid Hussain, president Pakistan Businessmen and Intellectuals Forum & All Karachi Industrial Alliance, chairman National Business Group Pakistan and chairman Policy Advisory Board FPCCI has urged the federal government to steer clear of ad-hoc fiscal tweaks and heavy-handed taxation on the formal sector in the upcoming Federal Budget 2026–27.

Speaking at a high-level pre-budget panel discussion organized by the Centre for Policy Research and Sustainability at Salim Habib University, titled ‘From Global Crises to National Policy: Shaping Pakistan’s Fiscal Budget 2026–2027,’ he stressed that the national economic strategy must balance stringent International Monetary Fund (IMF) stabilization mandates with the critical survival needs of the private sector.

While acknowledging that the provisional macroeconomic framework targets a real GDP growth rate of 4.1 percent with the Ministry of Finance’s provisional average inflation projection of 8.6 percent, compared with the IMF’s baseline estimate of 8.4 percent for the next fiscal year, he cautioned that the high cost of energy and persistent supply shocks driven by Middle East geopolitical tensions could easily push average inflation to 11 percent, necessitating further monetary tightening and crippling industrial capacity.

Mian Zahid Hussain pointed out that the massive revenue targets proposed under the IMF-backed consolidation plan place a disproportionate burden on the country’s documented businesses.

The federal government has projected total federal tax revenues at Rs17.144 trillion for FY2026–27, representing a sharp 13.5 percent increase over the current year, within which the Federal Board of Revenue (FBR) collection target is set at an ambitious Rs15.264 trillion.

This requires the FBR to collect an additional Rs1.836 trillion over the previous fiscal year, a goal he characterized as highly unrealistic given that the formal sector is already overtaxed and the FBR experienced substantial revenue shortfalls during the outgoing year.

He noted that while the IMF expects about 12 percent organic revenue growth based on its baseline estimates, forcing the existing tax-paying corporate sector to bear the brunt of the remaining increment will backfire, leading to capital flight and a contraction in industrial productivity.

He further underscored that the government’s target of achieving a sacrosanct primary budget surplus of 2 percent of GDP, equivalent to Rs2.9 trillion, and a net budget deficit of 3.5 to 3.9 percent, depends entirely on the volatile trajectory of debt servicing.

He highlighted that projected interest payments for the next fiscal year have already risen to Rs7.8 trillion compared to Rs7.3 trillion this year. If inflation remains elevated due to the 16.8 percent surge in housing and utilities and the 29.9 percent jump in transport costs witnessed recently, interest rates will remain high, driving up debt servicing costs and pushing the actual budget deficit closer to 4.5 percent of GDP.

He asserted that true fiscal sustainability cannot be achieved through aggressive tax enforcement alone, calling for the urgent implementation of structural reforms, including the digitization of tax administration, the provincial revenue measures of roughly Rs400–430 billion, including stronger GST-on-services enforcement and implementation of agricultural income tax reforms, the restructuring of loss-making State-Owned Enterprises, and a significant reduction in non-development expenditures to lower the cost of doing business.