The warning came during a discussion organised by the Institute of Policy Studies (IPS) in Islamabad on the federal budget 2026-27, chaired by Dr Ahmad Zubair, former chief economist. Speakers included Dr Zafar ul Hasan Almas, former joint chief economist; Dr Shahid Naeem, consultant at the Ministry of Poverty Alleviation and Social Safety; Prof Dr Shujaat Farooq, dean of research at PIDE; economic journalist Mehtab Haider; and chartered accountant and economist Qanit Khalil Ullah.

Dr Zafar ul Hasan cautioned that rising consumable imports and growing food security concerns could push inflation to 15 per cent in the coming months, potentially forcing an interest rate hike and requiring an additional Rs500-600 billion for debt servicing. He also flagged fragmented datasets, weak institutional coordination, and limited room for further tax increases as compounding risks.

Dr Shahid Naeem said that despite improved growth figures, survey data pointed to rising poverty and inequality, a reflection of elite capture and the burden of indirect taxation. He criticised social protection programmes for operating in silos and warned that weak accountability had eroded the effectiveness of government institutions.

Dr Shujaat Farooq argued that the budget has become increasingly ineffective as a regulatory instrument, with annual budgets disconnected from five-year development plans. He noted that revenue targeting has overshadowed the broader goal of development, and that most of Pakistan’s districts contribute nothing to exports.

Mehtab Haider said the salaried class continues to bear the heaviest tax burden while wealthy segments remain outside the effective tax net. He criticised the IMF’s one-size-fits-all stabilisation approach and called for documenting the informal economy and prioritising investment in the next budget. Agricultural and retailer taxation, he added, exist in law but not in practice, a problem requiring political will to fix.

In his concluding remarks, Dr Ahmad Zubair stressed that Pakistan must embrace development-oriented economic thinking to raise per capita income. He warned that economic sovereignty is eroding and that poor governance remains the central challenge, one that persists despite substantial tax collection and alongside mounting circular debt and growing inequality.