Vice President of the Pakistan Peoples Party Senator Sherry Rehman, while speaking in the Senate today, congratulated the nation on what she termed a major diplomatic achievement, highlighting Pakistan’s constructive role in facilitating peace efforts amid tensions between Iran and the United States.
“Pakistan invested in hope, dialogue and diplomacy. The international community has acknowledged and appreciated these efforts” she said.
She noted that Prime Minister Shehbaz Sharif had acknowledged the contributions of President Asif Ali Zardari, PPP Chairman Bilawal Bhutto Zardari and the wider political leadership in supporting these diplomatic efforts.
Referring to the broader regional impact of peace, Senator Rehman said that stability in the Strait of Hormuz would strengthen global energy security, improve supply chains and contribute to greater price stability.
“We hope that reduced tensions will ultimately help bring down oil prices globally and in Pakistan, easing inflationary pressures and providing relief to ordinary citizens, particularly vulnerable households already struggling with rising costs,” she added.
“With almost 45 percent of our population living below the poverty line, lower international energy prices offer much-needed relief to ordinary citizens. Peace is not only a diplomatic achievement; it is also an economic necessity for millions of people,” she said.
Based on this Senator Rehman said that while the current budget offered economic stabilisation it does not solve growing fundamental challenges.
Referring to the Rs 18 trillion federal budget, she called for a more equitable taxation structure that increases direct taxation while reducing dependence on indirect taxes and sales taxes that disproportionately impact lower-income groups.
“The country’s fundamental problem is that it is living on borrowed money, which is clear when you see almost 50 percent of expenditures go into debt servicig. To change that Pakistan has to broaden the taxation pool, which is no rocket science. Trade and service sectors need to contribute far more to national revenues to be able to fix the gaping hole at the heart of the budget. At the same time Pakistan cannot continue relying on the same taxpayers while large segments of the economy remain undertaxed,” she said.
Senator Rehman said that only regressive levies that leached money away from the federal divisible pool were growing instead of being tapered off to the provinces as sales taxes, so that social spending can he enhanced. Our provinces have to yield up taxation to the federal government there will be no expenditure on social programs. She expressed serious concerns over the continued expansion of the petroleum levy, noting that it was originally introduced as a temporary measure.
“There is a clear difference between a tax and a levy. Levies do not flow to the provinces, while provinces are responsible for delivering health, education and other essential public services. When levies continue to rise, provinces lose fiscal space and are often forced to cut development spending. The petroleum levy is increasingly functioning like a sales tax which diverts money from the provinces, she said.
She added “Provinces have demonstrated stronger performance in taxing services whereas there is a crisis of revenues not matching expenditures at the centre.
Reiterating the importance of provincial empowerment, Senator Rehman said that increasing levies under the guise of taxation should not come at the expense of provincial financial rights.
“Health and education are delivered largely through the provinces. If we want better outcomes for our citizens, provinces must have the fiscal space and resources necessary to perform these responsibilities effectively,” she said.
Senator Rehman noted that approximately 42.8 percent of the federal budget was being absorbed by debt servicing, including both interest and principal repayments.
“When nearly half of the federal budget is consumed by debt obligations, the space available for development, social protection and public investment becomes severely constrained,” she said.
On the expenditure side we see a complete imbalance. An entire country’s PSDP plan costs less than the expenses of the federal government. At rupees one trillion the federal government is not just running ministries that should have devolved long ago but it is also erecting more parallel structures like Authorities to go along with redundant federal ministries. This is a recipe for government bloat. At the same time state-owned enterprises continue to place a staggering burden on public finances.
“Losses of state-owned enterprises reached Rs 832.848 billion in FY2025, with cumulative losses now standing at Rs 6.563 trillion. Yet another Rs 451 billion has been allocated to SOEs in this budget. This is a structural challenge that cannot be ignored indefinitely,” she added.
Senator Rehman welcomed the removal of the 18 percent sales tax on sanitary pads and contraceptives, describing it as an important step towards improving affordability and access to essential products for women and families.
She further stressed the need to create stronger incentives for businesses, stimulate growth and address unemployment, which currently stands at approximately 7 percent.
Senator Rehman also expressed concern over declining climate allocations despite Pakistan’s growing climate vulnerabilities.
“It is deeply concerning that climate-related levies are being collected with no clear path of those funds into decarbonisation. Especially while climate financing remains inadequate and climate budgets continue to shrink. Pakistan is among the countries most vulnerable to climate change, and this is precisely the time when climate investment should be increasing, not decreasing,” she said.
She noted that climate impacts were already affecting agricultural productivity and food security.
“Pakistan was once a net exporter of major commodities such as wheat, cotton and sugar. Today, climate pressures and longstanding structural challenges have increased our dependence on imports. This trend should concern all policymakers,” she warned.
Concluding her remarks, Senator Rehman called for a more inclusive budget-making process, where tax collection gaps were addressed. One of the better solutions might be to give sales tax on goods to provinces as well, given the fact that their record of collecting is much better than FBR. She urged consultations to begin in January well before the presentation of the next budget.
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