It is not about the tax-to-GDP ratio

Pakistan’s economic trajectory over the past decade reflects enduring policy missteps and leadership failures. Since 2013, the country has averaged just 3.5 per cent GDP growth annually, significantly trailing regional peers. During the same period, the external trade deficit has persistently hovered around 7–8pc of GDP, financed increasingly by external borrowing. These dynamics underline deep structural imbalances rather than transient fiscal shortfalls. The International Monetary Fund’s 2024 Extended Fund Facility of $7 billion mandated a sharp increase in Pakistan’s tax-to-GDP ratio, which has remained stagnant around 9–10pc for years. While raising revenues is important, Nobel laureate Milton Friedman cautioned that “the government solution to a problem is usually as bad as the problem and very often makes the problem worse”, highlighting the risks of blanket tax hikes without addressing underlying economic weaknesses.