[6:36 PM, 6/9/2026] Bhai: KARACHI: As Pakistan prepares to announce the FY2027 federal budget, economists have warned that the government’s fiscal consolidation strategy could lead to higher energy prices, increased inflation, and greater financial pressure on households and businesses.
Experts caution that reliance on indirect taxation, reduced subsidies, and higher non-tax revenues may help narrow the fiscal deficit but could come at the expense of economic growth, industrial competitiveness, and consumer welfare.
Speaking to The Express Tribune, Deputy Executive Director and founding head of the Policy Solutions Lab at the Sustainable Development Policy Institute (SDPI), Dr Sajid Amin Javed, criticized the government’s continued dependence on inflationary revenue measures.
“The government is once again resorting to short-term measures to bridge the fiscal gap, primarily through regressive indirect taxes and non-tax revenues such as the Petroleum Development Levy (PDL),” he said. According to Javed, the projected collection of around Rs1.7 trillion through PDL highlights how the levy has evolved from a fiscal cushion into a major revenue-generation tool.
He stressed that sustainable fiscal consolidation should focus on broadening the tax base rather than placing a heavier burden on already compliant taxpayers and formal sectors of the economy.
Energy and regulatory economist Dr Afia Malik warned that consumers are already paying significantly more than the average electricity tariff of approximately Rs33.4 per unit after the inclusion of taxes, surcharges, and levies. She noted that capacity payments alone contribute more than Rs17 per unit to electricity costs.
According to Dr Malik, while cost-reflective tariffs are necessary, reducing inefficiencies within the power sector is equally important. She highlighted transmission and distribution losses, operational inefficiencies, and rising capacity payment obligations as major factors driving electricity prices upward.
“Consumers are paying not only for the electricity they consume but also for inefficiencies embedded in the power system,” she said.
She further cautioned that proposed tariff rationalisation measures could create affordability challenges for households and industries. Dr Malik suggested that bringing electricity tariffs within the range of Rs25–30 per unit would improve affordability and competitiveness, provided inefficiencies are addressed and debt-related costs are removed from electricity bills.
The economist also questioned the effectiveness of the current slab-based tariff structure, arguing that it often creates market distortions and, in some cases, benefits higher-income consumers more than intended.
On subsidy reforms, Dr Malik supported targeted assistance but warned that existing social protection mechanisms may not adequately cover all vulnerable consumers. She noted that gaps in coverage could increase energy poverty and potentially encourage electricity theft among financially stressed households.
The power sector continues to face challenges related to high system losses, uneven bill recoveries, and growing capacity payment obligations. While long-term contractual commitments limit the government’s ability to reduce capacity payments immediately, Dr Malik emphasized that greater integration of renewable energy could help lower generation costs.
She urged policymakers to prioritise *grid modernisation, expand *time-of-use tariffs, and improve infrastructure to better accommodate Pakistan’s rapidly growing solar energy capacity.
Industry stakeholders are also closely monitoring budget proposals amid concerns that rising electricity and gas prices are eroding competitiveness and limiting indu…
[6:36 PM, 6/9/2026] Bhai: # UN
