“Capital begins to flow in the wrong direction when imports become artificially attractive, eventually consuming domestic industry.”
“سرمائے کا پانی غلط جگہ بہنے لگتا ہے اور درآمد سستی دکھا کر اپنی صنعت کو کھا جاتی ہے۔ غیرت وہ نہیں جو حقیقت سے منہ چھپائے، غیرت وہ ہے جو حساب کا سامنا کرے۔”
This powerful observation by Mr. Rashid Mahmood Langrial, Chairman of the Federal Board of Revenue (FBR), in his article published in Jang on 23 June 2026 deserves serious national reflection. His message goes beyond taxation—it challenges Pakistan to rethink the direction of its economic policy and asks a fundamental question: Are we creating an economy that produces, or one that merely consumes?
For decades, Pakistan has debated tax rates, customs duties, subsidies, and fiscal deficits. Yet we have avoided answering one fundamental question:
What kind of economy does Pakistan want to become?
Are we an agricultural economy? An industrial economy? A services economy? An export-led economy? Or are we gradually becoming an import-driven consumption economy?
After nearly eight decades of independence, Pakistan continues to rely on external financial assistance and repeated IMF stabilization programs. This is not merely a fiscal issue; it reflects the absence of a long-term national economic vision.
Every year, the federal budget becomes a contest of competing interests. Different sectors seek concessions, exemptions, and protection, while government institutions remain under pressure to satisfy IMF conditions and achieve ambitious revenue targets. The result is often a budget designed for short-term fiscal stabilization rather than long-term economic transformation.
One of the biggest concerns is the implementation of tariff reforms without adequately considering Pakistan’s industrial capacity. Lower tariffs may reduce prices in the short term, but if introduced without strengthening domestic manufacturing, they discourage local investment, reduce value addition, weaken SMEs, and increase dependence on imports.
Pakistan’s automobile industry is a clear example. The country has encouraged the import of CKD and SKD kits for new entrants with the expectation of technology transfer and localization. Unfortunately, localization has progressed far more slowly than originally envisioned. Unless industrial policy is linked with measurable localization targets, vendor development, technology transfer, and accountability, Pakistan risks becoming an assembly economy rather than a manufacturing economy.
Countries such as China, South Korea, and Vietnam adopted a different strategy. They first developed domestic supply chains, strengthened local vendors, invested in engineering capabilities, and only then integrated into global markets. Industrial strength came first; tariff liberalization followed.
The challenges extend beyond tariff policy. High electricity tariffs, expensive financing, logistics bottlenecks, and water shortages continue to erode Pakistan’s industrial competitiveness. Karachi, which contributes nearly 65% of Pakistan’s exports, continues to face recurring infrastructure and water supply challenges. These structural issues cannot be solved through taxation measures alone.
Equally important is the efficient use of public resources. Subsidies and incentive schemes should support productivity, exports, innovation, employment, and technology development, rather than narrow or short-term interests. Every rupee spent through fiscal incentives must generate measurable economic returns.
Pakistan also faces another difficult reality. Public debt continues to rise, while annual debt servicing consumes a substantial portion of government revenues. Under these circumstances, encouraging imports without expanding exports will only place further pressure on foreign exchange reserves and deepen dependence on external borrowing.
The upcoming Budget 2026–27 should therefore be viewed not merely as an annual financial exercise, but as an opportunity to redefine Pakistan’s economic direction.
The Government Should Prioritize:
- A long-term industrial policy.
- Time-bound localization targets for strategic industries.
- Affordable energy and competitive financing for manufacturing and SMEs.
- Greater support for engineering industries, SMEs, and export-oriented sectors.
- Strong incentives for research, innovation, and technology transfer in each sector of the economy.
- Stable and predictable policies that encourage long-term investment instead of annual uncertainty.
- Better coordination among the Ministry of Finance, Ministry of Commerce, Ministry of Industries & Production, FBR, SBP, and provincial governments to promote industrialization and exports rather than focusing primarily on revenue collection.
- I would also like to recommend that existing SME exporters/local manufacturer with an annual turnover of up to PKR 500 million be exempted from routine audit requirements. Relief from multiple audit procedures would allow SMEs to focus their resources and management time on expanding exports, improving productivity, and creating employment, rather than dealing with administrative compliance.
Industrialization is not merely an economic objective—it is a national necessity. Strong manufacturing creates quality jobs, strengthens SMEs, reduces imports, increases exports, broadens the tax base, and builds economic resilience.
Pakistan has reached a defining moment. We can continue managing recurring economic crises through external financing, or we can invest in productive industries capable of generating sustainable growth and foreign exchange earnings.
The choice before policymakers is clear:
A nation cannot borrow its way to prosperity. It must manufacture, innovate, export, and compete. Budget 2026–27 should become the budget that finally puts Pakistan on that path.
As Mr. Rashid Mahmood Langrial aptly concluded in his article:
“کوئی مسیحا آئے گا، کوئی قرض، کوئی نسخہ، کوئی دوست دیار، اور ایک شب میں سارا روگ دور کر دے گا۔ مگر مسیحا نہیں آتے، حضور؛ صرف تقاضے آتے ہیں۔”
BY Mashood Khan
Director – Mehran Commercial Enterprises
Expert Auto Sector / Former Chairman PAAPAM / Director – SMEDA
This exclusive article has been published in Automark Magazine’s July-2026 printed edition
