PAKISTAN’S macroeconomic recovery, which began showing signs of improvement in 2025, now faces renewed challenges. As highlighted by the Policy Research Institute of Market Economy (Prime) in its July 2026 report, rising geopolitical tensions have slowed the recovery, pushing inflation back into double digits and eroding the purchasing power of households and businesses alike.
The US-Iran conflict has indeed affected our economy. The resulting uncertainty in global energy markets contributed to inflationary pressures, increasing the cost of living for millions of Pakistanis. As hostilities have eased over the last few days and international oil prices have declined, it is imperative that the government ensures these gains are passed on to consumers through lower domestic petroleum prices. Reduction in fuel prices would not only provide much-needed relief to households but also help reduce transportation and production costs across the economy. The Prime report also draws attention to a long-standing imbalance in the taxation system. Salaried individuals continue to shoulder a disproportionately high tax burden through deductions at source, while large segments of the informal economy remain lightly taxed. Broadening the tax base is a far more sustainable solution than placing additional pressure on compliant taxpayers. Providing meaningful tax relief to the salaried class would improve disposable incomes and stimulate domestic economic activity. At the same time, we must look beyond short-term stabilization measures. Expanding exports, encouraging investment and improving competitiveness should be our priorities, not merely in words but through concrete actions. A broader tax base and export-led growth can gradually reduce dependence on foreign loans and external financial support, paving the way for a more resilient and self-reliant economy.
