ISLAMABAD: Short-term inflation rose to 11.32 per cent year-on-year in the week ending October 29, driven largely by perishable food products, according to official data released by the Pakistan Bureau of Statistics (PBS) on Friday.
The index, comprising 51 items whose prices are collected from 50 markets in 17 cities, is calculated weekly to track changes in the prices of essential commodities and services.
Short-term inflation has remained in double digits for several consecutive weeks, largely on the back of persistent increases in petroleum and diesel prices.
The data showed that of the 51 essential items monitored during the week, the prices of 15 commodities increased, while those of 12 items declined. Meanwhile, the prices of 24 items remained unchanged from the previous week.
The Sensitive Price Index (SPI), which tracks short-term inflation, decreased slightly by 0.35pc week-on-week, reflecting price fluctuations in both food and non-food items.
Unwilling to reduce the petroleum levy, the government has continued to raise petrol and diesel prices. The surge in energy costs is not only fuelling inflationary pressures but also indirectly boosting sales tax collections through higher prices of goods and services.
This is an example of cost-push inflation, in which rising energy costs lead to increases in food prices. As a result, households are facing mounting pressure from higher consumer prices.
The items that recorded the highest price increases over the previous week included tomatoes (34.91pc), potatoes (3.27pc), diesel (2.53pc), pulse gram (2.11pc), plain bread (1.29pc), onions (0.62pc), fresh milk (0.48pc), curd (0.46pc), vegetable ghee (0.29pc) and firewood (0.2pc).
The items that recorded week-on-week price declines included electricity charges for Q1 (3.92pc), chicken (2.95pc), eggs (2.81pc), wheat flour (0.83pc), LPG (0.73pc), bananas (0.71pc), rice IRRI-6/9 and masoor pulse (0.43pc each), petrol (0.39pc), sugar (0.35pc) and powdered milk (0.33pc).
On an annual basis, the items that recorded the highest price increases included LPG (106.86pc), electricity charges for Q1 (52.38pc), diesel (45.13pc), petrol (43.61pc), wheat flour (34.87pc), chicken (31.72pc), chilli powder (15.55pc), mutton (14.66pc), plain bread (12.26pc), beef (12.10pc), onions (8.99pc) and prepared tea (8.41pc).
In contrast, potato prices fell by 38.67pc, followed by tomatoes (27.99pc), eggs (26.70pc), sugar (25.21pc), powdered salt (14.86pc), gur (8.51pc), masoor pulse (8.37pc) and moong pulse (6.42pc).
Last week, short-term inflation rose to 11.85pc year-on-year, driven largely by higher wheat flour prices, according to data released by the PBS.
ISLAMABAD: Pakistan and China have signed an agreement to operationalise a green channel at the Sost-Khunjerab border for agricultural and allied products to facilitate bilateral trade.
The agreement was signed online between the customs administrations of the two countries at the Federal Board of Revenue (FBR) on Thursday. The Pakistani delegation was led by Member Customs (Operations) Syed Shakeel Shah, while the Chinese delegation was headed by Li Qinghua, deputy head of Urumqi Customs and director of Tashkurgan Customs.
According to an official announcement, the agreement aims to establish a green channel for an agreed list of agricultural products, allowing eligible consignments to undergo priority processing and examination while maintaining risk-based customs controls.
The arrangement also provides for enhanced information sharing and the exchange of risk alerts between the two customs administrations to strengthen coordination and improve cross-border trade management.
The agreement also provides for enhanced exchange of information and risk alerts between the two customs administrations to strengthen coordination and improve the management of cross-border trade.
It further envisages priority handling of perishable consignments to minimise delays and ensure their timely movement across the border.
The Pakistani delegation also included the chief collector of customs, Peshawar; the collector of customs, Gilgit-Baltistan; representatives of the Department of Plant Protection, NAFSA, Pakistan Single Window and the Ministry of Commerce; and the commercial counsellor at the Pakistan embassy in China.
The operationalisation of the green channel is expected to improve the efficiency of agricultural trade and strengthen customs cooperation between the two countries.
Khunjerab Pass connects Gilgit-Baltistan with China’s Xinjiang region and is the highest paved international border at 15,500 feet above sea level. Under the border protocol agreement signed between the two countries in 1985, the pass remains open for travel and trade between April and November. In winter, trade and travel are hampered by excessive snowfall.
Last year, Pakistan Customs collected Rs15 billion in revenue on imports from China through the Khunjerab Pass, breaking the previous record. Goods worth Rs2.8bn were also exported to China and Central Asian countries through the border crossing.
ISLAMABAD: Pakistan’s trade deficit with nine neighbouring countries widened by 26.62 per cent to $4.97 billion during the first quarter of 2026-27 compared to $3.93bn in the corresponding period last year.
The widening gap reflects a contraction in Pakistan’s exports to regional markets, largely due to reduced shipments to Afghanistan and Bangladesh.
Trade with Afghanistan, including exports, has remained suspended since Oct 10, 2025, further weighing on overall export performance.
Imports from China rose sharply during the July-September quarter, contributing significantly to the widening imbalance. Consequently, the bilateral deficit with China widened by $858.808 million, accounting for approximately 82.18pc of the increase in the combined deficit with the nine countries.
Gap with nine neighbours rises 26.6pc to $4.97bn in July-September
Exports to China rose marginally, while exports to Nepal also grew in percentage terms, though the increase remained negligible in dollar value.
In contrast, shipments to Afghanistan, Bangladesh and Sri Lanka declined, according to the latest data compiled by the State Bank of Pakistan.
Exports to nine countries—Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives—fell 6.72pc to $944.24mn in July to September of FY27, down from $1.01 billion in the same period last year.
By contrast, imports surged 19.79pc to $5.92bn in 3MFY27 from $4.94bn in the same months of the previous fiscal year.
Further analysis showed that imports from China grew 19.76pc to $5.82bn in 3MFY27, up from $4.85bn over the same period last year. Pakistan’s exports to China grew 17.95pc to $663.57m in 3MFY27 from $562.56m in the same months of the preceding fiscal year.
Imports from India increased by 68.90pc to $61.74m in 3MFY27 from $36.55m over the last year. Meanwhile, no exports to India were recorded in the first quarter of FY27.
Exports to Afghanistan fell 88.34pc to $18.86m in 3MFY27, down from $161.76m last year. Imports stood at $0.25m in 3MFY27, compared with $4.52m in FY26, a decline of 94.40pc.
Pakistan’s exports to Bangladesh declined by 2.96pc to $174.77m in 3MFY27 from $180.12m over the last year. Imports dipped 36.11pc to $13.88m in 3MFY27 from $21.73m over the last year.
Prime Minister Shehbaz Sharif’s warning against resistance to tax reforms has once again put a spotlight on the efforts to restructure the Federal Board of Revenue (FBR). The warning came after a pen-down strike call by the Inland Revenue Service Officers Association (IRSOA) in opposition to the reforms and subsequent punitive action against several officers.
Since 2000, successive governments have borrowed hundreds of millions of dollars from the World Bank to restructure tax administration. However, persistent weaknesses in compliance, audit and enforcement raise a fundamental question: why have repeated reforms over two decades failed to deliver lasting results, and how will the latest transformation plan be different?
The first major reform initiative began in 2000, followed by the World Bank’s approval of $102.9 million for the Tax Administration Reform Project in 2004. By 2012, the programme had established or upgraded 57 offices and facilities, including Large Taxpayer Units, Regional Tax Offices, Model Customs Collectorates and taxpayer facilitation centres. It also provided 11,445 items of equipment, including computers, alongside vehicles and improved office infrastructure.
The reforms introduced partial automation, universal self-assessment and the transfer of sales tax and federal excise administration from Customs to Inland Revenue. However, manual procedures persisted, limiting efficiency gains. Much of the investment appeared to improve working conditions rather than revenue collection. The World Bank’s 2012 completion report recorded disbursements of approximately $48.4m and rated the project’s outcome as “moderately unsatisfactory”, warning of a high risk to its sustainability.
Successive reforms since 2000 failed to produce results; investment in technology likely to remain ineffective sans central database to document transactions
Former FBR chairman Shabbar Zaidi says he had over $200m available for reforms during his tenure but chose not to spend it on the projects unlikely to succeed without fundamental institutional changes. He says that investment in technology would remain ineffective unless the government establishes a central economic database to record and document transactions. Without reliable data on economic activity, tax officers could not effectively verify income declared in tax returns or identify concealed income, he argues. The priority, therefore, should be documenting economic transactions rather than spending more money on administrative reforms.
Despite the earlier project’s un-favourable assessment, the World Bank approved another $400m under the Pakistan Raises Revenue Programme in 2019, followed by $70m in additional financing in 2025. Total approved financing for the two projects reached $572.9m, although this does not represent actual disbursements.
A major institutional change came in 2009 with the creation of the Inland Revenue Service (IRS), integrating sales tax and federal excise with income tax administration. The restructuring triggered resistance from Customs officers and disputes over authority, senior positions and career progression. Both services subsequently expanded their organisational structures through dozens of new directorates and field formations. This expansion raises questions about whether new formations addressed operational needs or also accommodated promotions and postings. Their staffing, expenditure, overlapping responsibilities and contribution to revenue collection require independent evaluation.
During the 2024 caretaker government, the then finance minister Shamshad Akhtar proposed separating Customs and Inland Revenue into distinct organisations with independent oversight. The proposals faced resistance from tax officials. Consequently, the restructuring was not implemented.
International experience offers no single organisational model. India maintains separate central authorities for direct and indirect taxes, while Australia and Britain operate integrated revenue administrations. The International Monetary Fund (IMF) and Organisation for Economic Cooperation and Development (OECD) emphasise professional competence, accountability and effective enforcement.
Tax expert Ikramul Haq says repeated restructuring and foreign financing would not improve FBR’s performance without fundamental institutional changes.
“Technology is necessary. Faceless assessment, digital invoicing, production monitoring and intelligent risk selection can reduce discretion. They cannot substitute for institutional design.”
He calls for separating tax policy from collection, merit based recruitment and promotions, and evaluating performance through voluntary compliance, recovery, refunds and reduced litigation rather than gross collection alone. He argues that corruption, poor performance and disagreement over reforms require separate treatment, while political accountability is equally necessary.
The FBR’s revenue composition illustrates the continuing challenge. According to its FY25 yearbook, withholding taxes accounted for 58.2pc of gross direct tax collection, while collection on demand contributed only 4.6pc. These figures raise questions about the returns from investment in offices, vehicles, staff benefits and performance incentives. The Auditor General also identifies demand collection as an indicator of departmental performance. However, the biggest challenge is to minimise the tax gap in the sales tax, which is reported at over Rs3 trillion.
Audit effectiveness remains another concern. The State Bank’s FY24 annual report noted that risk-based audits, introduced in 2019, had not been implemented across all functional levels. Manual interventions and poor recovery continued to weaken enforcement. The Auditor General’s FY25 report also identified deficiencies in tax assessments, recovery and litigation management. Procedural failures in tax litigation have attracted scrutiny. In December 2025, the Lahore Tax Bar Association sought an investigation into appeals dismissed by Lahore High Court because of missed statutory deadlines, raising questions about legal supervision and accountability within the revenue machinery.
The government’s emphasis on rising income tax return filings also warrants examination. The FBR reported 6.7m returns by Oct 14, compared with nearly 5m during the corresponding period last year, an increase of 34.38pc. However, higher filing numbers alone do not establish improved compliance, particularly when differential withholding rates encourage taxpayers to enter the active taxpayer list.
The latest FBR transformation plan focuses on digital enforcement. Faceless customs assessment began in December 2024, while the National Faceless Centre for Inland Revenue was established in Islamabad last month with nationwide expansion planned by June 2027. Automated case allocation and reduced interaction between taxpayers and officers may limit discretion and improve transparency. However, digital systems cannot independently guarantee competent audits, legally sustainable assessments or recovery of outstanding demands.
The question is whether artificial intelligence, digital invoicing, production monitoring and automated risk assessment can improve tax compliance without stronger audit procedures and enforcement accountability. These technologies can detect discrepancies and verify transactions, but their effectiveness depends on proper investigation, legally sustainable assessments and actual recovery. For instance, identifying fraudulent input tax adjustments or mismatches between production and sales achieves little unless violations lead to enforcement action. The success of digital reforms should therefore be measured not by the number of suspicious cases detected but by recoveries, reduced fraudulent claims and measurable improvements in tax compliance.
Published in Dawn, The Business and Finance Weekly, October 26th, 2026
ISLAMABAD: Pakistan’s trade deficit with Gulf partner countries narrowed 26.35 per cent to $2.85bn in the first quarter of 2026-27 against $3.87bn a year earlier, largely due to lower imports and moderately higher exports.
The steepest declines were 97.46pc and 72.51pc in import payments to Kuwait and Qatar. These two countries accounted for $947.923 million of the gross decline in import payments, partly offset by the substantial increase in imports from Oman.
On the export side, the UAE accounted for approximately 66.21pc of Pakistan’s total exports to the seven countries in 1QFY27, followed by Saudi Arabia at 19.45pc. The remaining five countries collectively accounted for just 14.34pc, according to data compiled by the State Bank of Pakistan.
The Middle East conflict has disrupted Pakistan’s trade since March. Exports to most Gulf states are shrinking, while imports from them are surging—worsening Pakistan’s external vulnerability and dependence on Gulf energy and raw materials.
Lower imports, higher exports cut gap by 26pc to $2.85bn in July-September
September emerged as the sixth month after the March contraction, suggesting Pakistan’s import flows are highly sensitive to geopolitical developments, particularly in energy corridors.
Pakistan remained heavily reliant on energy imports, particularly from the UAE and Saudi Arabia, which accounted for 90pc combined. Other countries, including Qatar, Kuwait, Oman, Jordan and Bahrain, remain secondary contributors despite their export capacity.
Pakistan’s exports to the Middle East rose 10.96pc to $864.878m in 1QFY27, up from $779.425m in the same period last year. In FY26, exports to the region fell by over 2pc to $3.093bn from $3.152bn the previous year.
In contrast, imports from the region fell 20.02pc to $3.717bn in 1QFY27, down from $4.648bn a year earlier. In FY26, imports posted negative growth of 4pc to $16.413bn from $17.097bn a year earlier.
Country-wide data showed exports to Saudi Arabia grew by 4.92pc in 1QFY27 from a year ago. Imports, however, dipped by 18.52pc from Saudi Arabia, showing a clear dip in Pakistan’s imports of Saudi goods, especially oil.
A positive trend was observed in export proceeds to the UAE, which increased by 16.35pc in 3MFY27, with notable gains in Abu Dhabi, Ajman, and Fujairah. Imports from the UAE fell by 6.15pc, mainly due to lower petroleum and commodity inflows.
Exports to Qatar fell by nearly 22.79pc, while imports dipped by 72.51pc in 1QFY27 year on year. The import decline reflects a major reversal in energy-related purchases from the region.
Exports to Kuwait dipped 2.24pc, but imports plunged 97.46pc in 1QFY27. This indicates Pakistan’s reliance on Kuwaiti imports, especially petroleum, compared to a year ago.
Exports to Bahrain contracted 23.07pc, while imports also dipped 17.31pc in 1QFY27. Exports to Jordan rose by 4.70pc, while imports declined 29.27pc. Pakistan’s exports to Oman rose 10.73pc while imports surged 97.40pc during July-September.
WORLD Bank official Sandeep Mahajan meets Finance Minister Muhammad Aurangzeb.—X/ @Financegovpk
• Calls for stronger investment, private sector activity • Aurangzeb stresses need to strengthen investor confidence
ISLAMABAD: In what appears to be a push towards accelerating growth, the World Bank has advised Pakistan to move from stabilisation to sustainable growth, with a focus on strengthening investment and private sector activity.
This marks the second such endorsement from the international financial institution, which recently commended Pakistan’s stabilisation programme and urged a shift towards sustainable growth to generate employment opportunities for the youth. The IMF has also offered similar advice to Islamabad at a recent workshop on tax reforms.
World Bank Regional Practice Director for the Prosperity Vertical for the Middle East, North Africa, Afghanistan and Pakistan (MENAAP) Sandeep Mahajan met Finance Minister Muhammad Aurangzeb on Friday. He was accompanied by Country Director Bolormaa Amgaabazar and International Finance Corporation (IFC) Division Director Simon Andrews.
An official statement said the meeting discussed Pakistan’s economic reform agenda, the transition from stabilisation to sustainable growth and priorities for strengthening investment and private sector activity.
Mr Mahajan congratulated Pakistan on restoring macroeconomic stability and commended the government’s management of the recent crisis arising from regional conflict.
He noted that buffers built through stabilisation efforts and a timely policy response had helped Pakistan manage external pressures. World Bank representatives emphasised the importance of sustaining these gains through continued reforms and effective implementation.
Mr Aurangzeb said the government’s priority was to make macroeconomic stability durable and translate it into sustainable, investment-led and export-driven growth.
He said that Pakistan had regained access to international capital markets, including through its recent $3 billion Eurobond issuance with five-year and 10-year maturities.
The minister also stressed the need to secure further credit rating upgrades, strengthen investor confidence and improve Pakistan’s sovereign credit profile.
Mr Aurangzeb underscored the importance of a credible transition framework that maintained fiscal discipline, addressed external sector vulnerabilities and strengthened the foundations for private sector-led, responsible and sustainable growth.
The discussion also covered international experience in strengthening fiscal frameworks and policy credibility to manage external risks and support investor confidence.
Policy continuity was highlighted as another key requirement for sustained economic progress. The finance minister noted that investment and productivity depended on a predictable policy environment and consistent implementation.
Mr Aurangzeb and the World Bank representatives also exchanged views on the government’s growth and jobs agenda, including opportunities to strengthen private sector investment, improve the regulatory environment and mobilise financing for infrastructure.
The discussion covered privatisation, the importance of clear regulatory frameworks and credible post-privatisation arrangements, as well as the potential to develop infrastructure projects through appropriate financing structures and collaboration with development partners.
Both sides reaffirmed the importance of continued cooperation between Pakistan and the World Bank, with a focus on sustaining macroeconomic stability, advancing structural reforms, strengthening policy continuity and translating reform gains into investment, employment and improved economic opportunities.
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