Key takeaways
- Debt servicing absorbed about 70% of tax revenue and 41% of spending in FY25 (SBP).
- Textiles made up about 53% of exports in July–March 2025.
- Consumption is about 96% of GDP while tax-to-GDP remains in single digits.
- Fixing the energy balance sheet first would give quick, visible credibility.
- Budgets should be judged by whether they expand export capacity.
In this Minute Mirror column (February 2026), Dr. Ghulam Mohey-ud-din argues that Pakistan’s binding constraint is not a lack of growth but a lack of export capacity. Every expansion raises imports, exports fail to keep pace, reserves fall and growth is cut short.
The argument
Fiscal space is too narrow to break the cycle. According to State Bank of Pakistan accounts for FY25 cited in the column, debt servicing consumed about 70 percent of tax revenue and 41 percent of total expenditure. What remains goes largely to transfers, subsidies and arrears rather than to the infrastructure exporters need.
The export base is also concentrated. Textiles made up roughly 53 percent of exports in July to March 2025, according to the Finance Ministry, leaving the economy exposed to price swings and trade rules in one sector. With consumption at around 96 percent of GDP and tax revenue still in single digits as a share of GDP, domestic demand will keep outrunning foreign-exchange earnings unless exports change.
The column sets out three reforms. First, trade logistics: port efficiency, customs automation, risk-based inspection and cold chains, which could lift exports within 12 to 18 months. Second, industrial energy pricing, which requires repairing the power sector’s balance sheet. Third, export incentives that are measurable, audited, time-bound and tied to actual foreign-exchange earnings rather than connections. The author suggests starting with energy, because circular debt is visible and progress would build credibility quickly.
What needs to change
- Redirect development spending to trade logistics.
- Restructure distribution companies, target subsidies and report energy finances transparently.
- Replace discretionary support with rules-based, audited export incentives.
- Judge each budget by whether it expands export capacity or merely delays the next balance-of-payments crisis.