Pakistan stands at a defining crossroads. The Federal Budget 2026-27 arrives not merely as a routine fiscal exercise but as a critical opportunity to reshape the nation’s future. At a time when inflation continues to erode household incomes, utility costs are escalating, the import bill remains significantly higher than exports, and economic uncertainty affects millions of citizens, Pakistan requires a budget that places people at the center of national development.
The true success of Budget 2026-27 will not be measured solely by revenue collection or fiscal targets. It will be measured by improvements in education, healthcare, employment opportunities, research and innovation, agricultural productivity, social protection, and the quality of life of ordinary Pakistanis.
Pakistan’s salaried class remains one of the most documented and tax-compliant segments of society. Taxes are deducted at source, leaving little room for avoidance. Yet inflation, rising electricity and gas tariffs, increasing educational expenses, healthcare costs, housing expenditures, and transportation charges have significantly reduced the purchasing power of middle-income families. The hard statistical reality is striking: in fiscal year 2023-24, salaried individuals contributed a record Rs. 368 billion in income tax to the national exchequer — surpassing the combined tax paid by exporters and retailers, who together contributed only Rs. 111 billion, or Rs. 257 billion less than the salaried class. For fiscal year 2024-25, the government further increased income tax rates and imposed a 10% surcharge on the highest income bracket, pushing the salaried class contribution to over Rs. 550 billion — making salaried persons among the single largest contributors to direct income tax in Pakistan. Despite this enormous fiscal contribution, many households that once enjoyed financial stability now struggle to meet routine expenses. The Federal Budget 2026-27 should therefore provide meaningful relief through inflation-adjusted tax slabs, enhanced tax credits for education and healthcare expenditures, and measures aimed at reducing the burden of utility costs on middle-income households.
It is noteworthy that Federal Finance Minister Senator Muhammad Aurangzeb, in a written response to the National Assembly in March 2025, formally stated that there was no proposal under consideration to increase the salaries or pensions of government employees in the upcoming budget for fiscal year 2025-26, and that no revision of pay scales or allowances was being considered. This announcement, made at a time of persistently high inflation and rising living costs, was deeply disconcerting for millions of government servants who had been hoping for financial relief. The Finance Minister’s position, though later subject to clarification by the Finance Ministry, reflected a troubling institutional stance that prioritizes fiscal consolidation over the welfare of Pakistan’s most disciplined and tax-compliant workforce. While the Finance Minister subsequently announced a 10% salary increase for government employees in the Budget 2025-26 speech, the initial resistance to acknowledging their plight underscored the need for a more empathetic and forward-looking fiscal approach in Budget 2026-27.
The impact of inflation is even more severe on low-income households, daily wage earners, domestic workers, small farmers, and workers employed in the informal sector. Rising food prices and utility bills consume a major portion of their monthly income, leaving little room for healthcare, education, or savings. The government should strengthen targeted social protection initiatives, expand support through cash transfer programs, improve food security interventions, and ensure that vulnerable populations receive adequate assistance without creating unsustainable fiscal burdens.
Education: The Foundation of Prosperity
Education: The Foundation of ProsperityNo country has achieved sustained economic development without investing heavily in education. Developed nations consistently allocate significant portions of their GDP to education because they recognize that human capital is the foundation of prosperity. Pakistan currently spends approximately 2 percent of GDP on education, which remains considerably below international standards. With millions of children out of school and concerns regarding educational quality, there is an urgent need to increase educational investment. The Federal Budget 2026-27 should establish a clear roadmap to gradually raise education spending toward international benchmarks. Investments should focus on improving schools, teacher training, digital learning, technical education, vocational training, and higher education institutions.
Higher Education Commission: Engine of Innovation
The Higher Education Commission plays a central role in developing Pakistan’s universities, supporting research, improving academic standards, and facilitating international collaboration. However, limited financial resources have constrained its ability to fulfill these responsibilities effectively. Pakistan’s universities possess tremendous potential in agriculture, biotechnology, artificial intelligence, climate science, engineering, health sciences, and emerging technologies. Increased HEC funding should support research grants, scholarships, faculty development programs, technology parks, innovation centers, startup incubators, commercialization initiatives, patent development, and international research collaborations.
Universities should not be viewed merely as educational institutions. They are engines of innovation, entrepreneurship, technology transfer, commercialization, economic growth, and national competitiveness. Enhanced allocations for HEC can significantly contribute to knowledge creation, industrial advancement, import substitution, and export-oriented economic growth.
Healthcare: An Investment, Not an Expenditure
Healthcare remains one of Pakistan’s most critical development challenges. Public health spending remains relatively low, placing enormous pressure on both healthcare institutions and citizens. The Federal Budget 2026-27 should prioritize investments in primary healthcare facilities, maternal and child health services, preventive medicine, disease surveillance systems, nutrition programs, affordable medicines, cancer diagnosis facilities, and modern healthcare infrastructure. A healthy population contributes directly to economic productivity, workforce participation, and social stability. Healthcare spending should therefore be viewed as an investment rather than an expenditure.
Long-Term Investments for Inclusive Growth
While providing immediate relief to citizens affected by inflation and rising living costs remains essential, the Federal Budget 2026-27 must also focus on long-term investments that promote inclusive growth, employment generation, productivity enhancement, and sustainable national development.
Agriculture remains the backbone of Pakistan’s economy and supports millions of livelihoods. Increased investment is needed to support small farmers through climate-smart agriculture, modern irrigation systems, improved seed technologies, integrated pest management, mechanization, storage facilities, agricultural research, and value-added agro-industries. Such measures can improve food security, reduce rural poverty, strengthen agricultural exports, and contribute significantly to national economic growth.
Quality education and skills development are fundamental to economic progress. The government should increase investments in schools, colleges, universities, technical institutions, vocational training centers, digital literacy programs, and industry-linked skill development initiatives to prepare youth for emerging employment opportunities and improve national productivity.
Healthcare spending should be substantially increased to strengthen primary healthcare systems, maternal and child health services, preventive healthcare, disease surveillance, nutrition programs, affordable medicines, cancer diagnosis and treatment facilities, and modern healthcare infrastructure, particularly in underserved rural areas.
Pakistan requires comprehensive energy sector reforms focused on reducing circular debt, improving operational efficiency, expanding renewable energy projects, modernizing transmission systems, and ensuring affordable electricity for households, agriculture, and industries.
Small and Medium Enterprises are vital drivers of employment and economic growth. Low-interest financing, simplified regulations, tax facilitation, business incubation services, and support for women entrepreneurs, startups, and youth-led enterprises should be prioritized.
Given increasing climate-related challenges, substantial investments should be made in dams, flood protection infrastructure, irrigation modernization, water conservation projects, drought management initiatives, and climate adaptation programs to protect livelihoods and ensure sustainable development.
The government should strengthen social protection programs by expanding targeted cash transfers, disability assistance schemes, orphan support initiatives, widow assistance programs, and women empowerment projects to protect vulnerable populations from economic shocks.
Trade Imbalance and Export-Oriented Growth
Pakistan’s annual import bill remains approximately 52 billion dollars while exports hover around 25 billion dollars. This persistent trade imbalance underscores the urgent need to strengthen domestic manufacturing, industrial modernization, value addition, innovation, commercialization, and export-oriented growth. Greater support should be provided to export-oriented industries, textile modernization, pharmaceutical manufacturing, engineering industries, information technology services, and local manufacturing to improve foreign exchange earnings.
Investment in rural roads, affordable public transportation, logistics networks, warehousing facilities, and digital infrastructure can improve market access, strengthen regional connectivity, and promote economic inclusion.
Enhanced funding for universities, research institutions, innovation centers, technology parks, startup incubators, and commercialization initiatives is essential for strengthening Pakistan’s knowledge economy and long-term competitiveness. Research in agriculture, artificial intelligence, biotechnology, renewable energy, climate resilience, and digital technologies should receive priority support.
Sustainable economic growth requires effective population management policies. Increased investment in family planning services, women’s education, reproductive health programs, and community awareness initiatives can contribute significantly to human development and poverty reduction.
Fiscal sustainability requires broadening the tax base rather than imposing additional burdens on already compliant taxpayers. Improved tax administration, digitalization, transparency, accountability, expenditure rationalization, and efficient utilization of public resources should remain central components of fiscal policy.
International Benchmarks: Lessons for Pakistan
The experience of successful economies demonstrates that sustained investment in people is the most reliable pathway toward prosperity. Pakistan currently allocates approximately 2 percent of GDP to education and less than 3 percent to healthcare. In comparison, the United States spends approximately 5 percent of GDP on education and over 16 percent on healthcare. The United Kingdom allocates around 5 percent to education and nearly 10 percent to healthcare. Germany and France spend approximately 5 to 6 percent of GDP on education and more than 11 percent on healthcare. Canada allocates around 6 percent to education and over 11 percent to health services. South Korea transformed itself into a global technological powerhouse through sustained investments in education, research, innovation, industrial development, and human resource development.
These nations have developed world-class universities, advanced healthcare systems, highly skilled workforces, robust innovation ecosystems, and globally competitive industries because they consistently invested in human capital. Pakistan must gradually move toward allocating at least 4 percent of GDP to education and 5 percent of GDP to healthcare while ensuring transparency and efficiency in public spending.
The Higher Education Commission remains one of Pakistan’s most important institutions for national development. Enhanced allocations for HEC should support research grants, postgraduate scholarships, faculty development programs, technology parks, innovation centers, startup incubators, commercialization initiatives, patent development, and university-industry linkages.
The efforts of Dr. Niaz Ahmad Akhtar, Chairman Higher Education Commission Pakistan, and Dr. Iqrar Ahmad Khan, Chairman Punjab Higher Education Commission, deserve sincere appreciation. Both distinguished academic leaders have consistently worked to strengthen universities, enhance research and innovation capacities, promote commercialization and university-industry linkages, improve academic quality, and elevate the global competitiveness of higher education institutions. Their continued advocacy for enhanced university funding reflects a strong commitment to developing human capital, advancing scientific research, fostering technological innovation, and supporting national development through knowledge-based growth.
Government Employees, Pensioners and University Faculty: Urgent Attention Required
Special attention must also be given to government employees who remain among the most dedicated, disciplined, hardworking, and patriotic contributors to national development. They serve Pakistan in schools, colleges, universities, hospitals, research institutions, law enforcement agencies, public administration departments, and development organizations. Persistent inflation, rising food prices, escalating utility bills, transportation costs, healthcare expenditures, and educational expenses have significantly reduced their purchasing power. The Federal Budget 2026-27 should therefore provide meaningful salary increases, inflation-adjusted allowances, and targeted relief measures.
In this context, it is important to recall that Finance Minister Senator Muhammad Aurangzeb had, in March 2025, initially informed the National Assembly that no proposal was under consideration to increase the salaries or pensions of government employees in the budget for 2025-26. This announcement generated widespread concern and disappointment among government servants across the country. While the Finance Ministry subsequently issued a clarification and the budget ultimately provided a 10% salary increase, the episode highlighted the persistent vulnerability of government employees to fiscal austerity decisions. For Budget 2026-27, it is imperative that the welfare of government employees and pensioners be treated as a priority, not an afterthought.
Similarly, pensioners who devoted decades of service to the nation deserve greater financial protection. Inflation has substantially reduced the real value of pensions, creating hardships for retired public servants who played a vital role in building Pakistan’s institutions.
Faculty members serving under the Tenure Track System (TTS) in Pakistani universities also require urgent attention. Despite their critical role in teaching, research, innovation, commercialization, technology transfer, and human resource development, TTS salaries have remained largely stagnant while living costs continue to rise. Strengthening the TTS framework and revising salary structures will help retain talented scholars, improve research productivity, and enhance Pakistan’s international academic standing.
Conclusion: A People-Centered Budget for National Transformation
Pakistan possesses enormous strengths: a youthful population, fertile agricultural resources, expanding technological capabilities, growing entrepreneurial talent, and resilient institutions. The challenge is not a lack of potential but a lack of sustained investment in people.
The Federal Budget 2026-27 presents a historic opportunity to prioritize education, healthcare, higher education, research, innovation, agriculture, social protection, climate resilience, economic inclusion, and human development. Such investments are not costs; they are investments in national prosperity.
The government should seriously consider increasing allocations for education to at least 4 percent of GDP in the medium term and healthcare to at least 5 percent of GDP while ensuring transparency and efficiency in public spending. Meaningful relief for government employees, pensioners, university faculty members, persons with disabilities, widows, daily wage earners, small farmers, low-income families, and the salaried class should remain a central objective of fiscal policy.
It is humbly requested that the Honourable Prime Minister of Pakistan, Mian Muhammad Shehbaz Sharif, Deputy Prime Minister Senator Ishaq Dar, Federal Finance Minister Senator Muhammad Aurangzeb, and all policymakers give special consideration to the challenges faced by government employees, pensioners, university faculty members, persons with disabilities, widows, daily wage earners, small farmers, and low-income households while finalizing the Federal Budget 2026-27. Government employees remain among the most dedicated, disciplined, hardworking, and patriotic contributors to national development and deserve due recognition and support.
The success of the budget will ultimately be judged by whether it improves the lives of ordinary citizens, strengthens public institutions, empowers universities, enhances HEC funding, creates employment opportunities, reduces poverty, enhances exports, promotes innovation and commercialization, and lays the foundation for sustainable economic growth.
A truly people-centered budget can transform Pakistan’s future and place the country on a path toward inclusive development, global competitiveness, innovation-driven growth, and shared prosperity.
Author: Professor Dr. Muhammad Jalal Arif ,Former Professor and Head of Department, Entomology,University of Agriculture Faisalabad,Email: [email protected]
