Chapter 10 · The Course
Ten leaks. Ten repairs.
Everything on this page is analysis: our reading of the evidence in the other chapters, written for someone who has to decide what to do on Monday. Each problem is tied to a figure you can check. Each fix is something a government could start without anyone's permission.
Analysis
The next twelve months
Eight things that are about to happen, and should not.
None is certain. All are where the present course leads.
A mini-budget on the same taxpayers
The FBR must collect Rs15.26 trillion, 17% more than last year, with inflation eating incomes. When it falls short, the quick fix is higher rates on salaries, fuel and sales. The untaxed stay untaxed.
Another round of development cuts
Punjab owes a Rs910bn surplus. Sindh has already cut its programme by 30%. Schools, clinics and roads are the line that gives when a surplus has to be found.
The interest bill climbs again
Interest fell to Rs6.95 trillion in FY26 because rates fell. Rates are back up and the FY27 budget assumes Rs8.05 trillion. Much of the fiscal improvement came from a rate cycle that has now turned.
Gulf jobs dry up
New departures for work are running about a fifth below last year. Remittances lag hiring by a year or more. The $41.6bn that balances the external accounts is the next number at risk.
The war restarts in earnest
The US President has said renewed strikes on Iran are possible after the November midterm elections. Oil is already near $100. A return to $118 would repeat April's price shock on a weaker household base.
The Gwadar window closes
When the strait reopens fully, shipping lines go back to Jebel Ali. If the channel is still 12.5 metres deep on that day, the opportunity is gone until the next crisis.
A fight over the provinces' money
A 28th Amendment that makes the provincial share adjustable would pit Islamabad against Karachi, Peshawar and Quetta at the moment cooperation is most needed.
The programme ends with nothing behind it
The IMF arrangement runs out in late 2027. Without a wider tax base and rising exports by then, the choice will be another programme or another crisis.
Diagnosis and repair
What is wrong, what shows it, and what fixes it.
The leak
The tax net catches the same people every year.
Salaried workers paid Rs633bn; all retailers Rs70bn. Five in a hundred working-age adults are on the taxpayer list. Rs2.35 trillion is exempted.
The repair
- Tax retail turnover through card and QR payments, with a low flat rate that is cheaper to pay than to dodge.
- Value property at market prices for tax, in every province.
- Collect agricultural income tax above a real threshold.
- Sunset every exemption after three years unless parliament renews it.
- As the base widens, cut the rates on salaries.
The leak
Interest is the largest thing the state buys.
Rs8.05 trillion in FY27, 43% of the budget and more than all the tax the centre keeps after the provinces' share.
The repair
- Keep the primary surplus, but earn it from new taxpayers, not from development cuts.
- Use every rupee from privatisation to retire debt, by law.
- Borrow longer when rates allow, so one bad year cannot double the bill.
- Stop issuing new guarantees to state firms.
The leak
The state spends on itself first and explains later.
A jet whose purpose changed after it was reported. Rs9.6bn of armoured cars. Rs3.18 trillion in supplementary grants, most without a prior vote.
The repair
- Publish every purchase above Rs50 million, federal and provincial, within 30 days, with the justification.
- Freeze aircraft and luxury vehicle purchases for the length of the IMF programme.
- No supplementary grant without a vote first, except for declared disasters.
- One public register of official aircraft, vehicles and who used them.
The leak
Provinces spend money they did not have to raise.
Federal transfers cover 62–81% of provincial budgets. Their own tax bodies raise Rs852bn against Rs12.7 trillion of spending.
The repair
- Tie a slice of each province's transfer to its own revenue effort and to results in schooling and health.
- Make property tax a real tax and hand it to city governments.
- Elect local governments and give them a fixed share by formula.
- Protect development and social spending with a floor when surpluses are demanded.
The leak
State firms and the power sector burn cash.
Rs832bn of losses in FY25, Rs2,078bn of government support, and Rs1.675 trillion of unpaid power bills.
The repair
- Put the worst power distributors under private management contracts with loss targets.
- Fund the highway authority from tolls, not the budget.
- Renegotiate capacity payments plant by plant, in the open.
- Close or sell what cannot be fixed, starting with the steel mill.
The leak
The country exports people instead of goods.
Goods exports fell to $30.1bn. Remittances reached $41.6bn. One city, Sialkot, exports $2.6bn on its own.
The repair
- Copy what works in Sialkot: clusters, shared infrastructure, and the state staying out of the way.
- Pay exporters' tax refunds on time, every time.
- Give industry electricity at the regional price.
- Cut import tariffs on inputs so that exporting is more profitable than selling at home.
The leak
One strait can stop the economy.
Most oil comes through Hormuz. Petrol rose 40% in a month and inflation doubled. Nearly half of remittances come from Saudi Arabia and the UAE.
The repair
- Build strategic fuel storage measured in weeks, not days.
- Sign supply contracts that land outside the Gulf.
- Expand rooftop and grid solar and fix the grid to carry it.
- Open labour markets beyond the Gulf with skills that travel.
The leak
The ports and the borders are shut or slow.
Gwadar's channel is 12.5 metres. Ships waited 5.5 days at Karachi. Trade with Afghanistan is down 53% and with India it is zero.
The repair
- Dredge Gwadar to 14 metres and secure one scheduled mainline service.
- Clear containers at Karachi in 48 hours.
- Make the Iran corridor permanent.
- Separate trade from the security dispute with Kabul and reopen the crossings under monitoring.
The leak
A third of children are not in school.
28% out of school; 77% of ten-year-olds cannot read a simple text; women's literacy is 54%. Education's share of provincial budgets fell this year.
The repair
- Pay the income-support stipend conditionally on school attendance, especially for girls.
- Measure reading at age ten in every district and publish it.
- Fix a minimum share of every provincial budget for schools.
- Feed children at school: it brings them in.
The leak
Nobody can tell the government no.
The first judges of the new constitutional court were chosen by the government. Audit findings repeat year after year. The corruption index score is 28 out of 100.
The repair
- Appoint constitutional judges through a commission with a judicial majority and open hearings.
- Give the Public Accounts Committee a deadline to act on each audit report, and publish what it does.
- Publish asset declarations for ministers and senior officials.
- Carry out the governance plan already promised to the IMF.
In what order
What to do first.
First 100 days
Stop the leaks that need only a signature
The purchase freeze and the public register. The rule on supplementary grants. The Gwadar dredging contract. A 48-hour clearance order at Karachi. The Iran corridor made permanent.
First year
Widen the net before the next budget
Retail and property into the tax system. Exemptions with expiry dates. Private management for the worst power distributors. Reading tests in every district. Afghan trade reopened.
Three years
Change who pays and who decides
Local governments with their own money. A transfer formula that rewards provinces for raising revenue and educating children. Judicial appointments out of the government's hands. Salaried tax rates coming down.
How to tell if it is working
Seven numbers to check in 2030.
These are our yardsticks, not official targets. They are chosen because each can be read from data that is already published every year.
| Measure | Today | By 2030 |
|---|---|---|
| People on the active taxpayer list | 9.0m | 20m |
| Income tax from retail and property against salaried | Rs348bn vs Rs633bn | Larger |
| Interest as a share of the federal budget | 43% | Under 30% |
| Goods exports | $30.1bn | $50bn |
| Poverty rate | 28.9% | Under 22% |
| Children out of school | 28% | Under 15% |
| Containers through Gwadar a year | 8,300 | 500,000 |
The ship is not sinking. It is being kept level by charging the passengers in steerage and cutting the engine room. It will sail when the first-class cabins pay their fare and the crew answers to someone.
Our conclusion.