Pakistan shapes the emerging order

Pakistan has never lacked economic advice. Since independence, successive governments have experimented with socialist planning, import substitution, nationalisation, structural adjustment, privatization, fiscal decentralisation, value added taxation, documentation drives, digital governance and, most recently, artificial intelligence in tax administration.  Almost every reform has been presented as the missing ingredient that would place the country on the path of sustained prosperity. However, Pakistan continues to oscillate between balance-of-payments crises, external dependence, fiscal instability and repeated recourse to the International Monetary Fund (IMF). This persistent failure raises a more fundamental question. Is Pakistan’s crisis primarily economic, or are economists asking the wrong questions? For decades, the dominant explanation has remained remarkably consistent. Pakistan is said to suffer from a narrow tax base, inadequate domestic resource mobilisation, weak public institutions, poor governance and inconsistent implementation of otherwise sound policies. According to this view, if taxes were broadened, exemptions withdrawn, administration digitalised and markets allowed to function efficiently, sustainable growth would eventually follow. There is much truth in these observations. They identify many of the symptoms. But they do not fully explain why technically sound reforms repeatedly fail in Pakistan while producing very different outcomes elsewhere. The reason, as suggested in earlier writings, is that Pakistan cannot be understood through the conventional assumptions of public finance alone. Economic policy does not operate in a constitutional vacuum; it reflects the incentives created by the political and legal institutions within which governments function. Orthodox economics generally assumes a constitutional order within which governments seek, however imperfectly, to maximise public welfare. Fiscal policy, taxation and expenditure are analysed as instruments for correcting market failures, financing public goods and promoting economic growth. Political constraints are acknowledged but usually treated as external distortions rather than integral components of economic analysis. Pakistan presents a different reality. Here, constitutional arrangements, political incentives, strategic considerations and informal institutions have shaped fiscal outcomes as much as, and often more than, economic policy itself. Taxation has frequently reflected the distribution of political power rather than principles of efficiency or equity.  Public expenditure has often been determined by strategic imperatives rather than developmental priorities. External assistance has repeatedly substituted for difficult domestic reforms. Elite bargains have preserved privilege while transferring the burden of adjustment to documented businesses, salaried individuals and ordinary consumers. These outcomes cannot be adequately explained by models that assume an impartial state pursuing coherent economic objectives. The analytical framework itself, therefore, requires reconsideration. This series proceeds from a simple but powerful proposition: before analysing taxes, budgets or debt, one must first understand the constitutional rules that shape political incentives. This is the central insight of Constitutional Political Economy (CPE).  Unlike conventional public finance, CPE begins not with taxes or budgets but with the constitutional rules, institutional incentives and political structures that determine how economic decisions are actually made. It asks a prior question: Who designs the rules under which economic policy operates, whose interests do those rules serve, and how do they shape incentives for both governments and citizens? Once that question is asked, many of Pakistan’s recurring puzzles begin to appear less mysterious. Why do technically sound tax reforms repeatedly fail? Why do successive governments rely on indirect taxation while avoiding politically influential sectors? Why has documentation remained elusive despite extraordinary advances in digital technology? Why does every external crisis quickly become a fiscal crisis? Why has debt expanded despite repeated stabilisation programmes? The answers lie not merely in economics but in the constitutional and political environment within which economics operates. This series proposes a different approach. Rather than examining taxation, debt or fiscal federalism as isolated subjects, it will analyse them as interconnected manifestations of Pakistan’s constitutional political economy. Future parts will explore how colonial legacies, post-independence constitutional choices, geopolitical dependency, elite capture, federal arrangements, judicial interpretation and administrative incentives have combined to shape Pakistan’s economic trajectory. The purpose is not to reject orthodox economics. Public finance remains indispensable. Sound taxation, efficient expenditure and macroeconomic stability are essential for any modern state. However, these instruments cannot achieve their intended objectives when the institutional environment within which they operate generates incentives that systematically frustrate reform. Pakistan’s crisis is not simply a fiscal crisis. Nor is it merely a crisis of governance. It is, more fundamentally, a crisis of constitutional political economy. Unless that deeper reality is understood, technical reforms, however well designed, will continue to produce disappointing results because they address the symptoms rather than the constitutional incentives that generate them. In the next part, we shall examine why the assumptions of orthodox public finance differ fundamentally from those of constitutional political economy, and why that distinction matters profoundly for understanding Pakistan. [To be continued]  ____________________________________________________________________ Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996. 

The first part of this series concluded with a question that goes deeper than the contractual forms employed by conventional or Islamic banks: who should possess the power to create money—society through its sovereign monetary authority, or commercial banks through the expansion of credit? It is impossible to reconstruct a financial order without answering this question. Popular understanding of banking remains surprisingly detached from the way modern money actually comes into existence. The conventional explanation suggests that people first deposit their savings with banks and banks subsequently lend part of those deposits to borrowers. Banks thus appear principally as intermediaries between savers and investors. Modern banking does not operate quite like this. The Bank of England, explaining the process in unusually clear terms, acknowledges that most money in a modern economy is created by commercial banks when they make loans. A bank granting financing normally credits the borrower’s account and simultaneously records a corresponding asset on its own balance sheet.  The deposit is created through the act of lending rather than necessarily representing money previously deposited by another saver. When the loan principal is repaid, the corresponding bank-created money is extinguished. This requires an important correction to the familiar expression “fractional-reserve banking”.  Banks are certainly required to maintain reserves, liquidity and regulatory capital, but contemporary money creation cannot accurately be understood as a mechanical process in which every rupee of reserves is successively multiplied into a predetermined number of rupees of loans.  Lending is constrained by capital requirements, liquidity, creditworthiness, profitability, regulation, settlement requirements and ultimately monetary policy. It nevertheless remains true that deposit-taking commercial banks create a substantial part of the money used by society. Pakistan is no exception. State Bank of Pakistan’s monetary data show that at end-June 2026 broad money was about Rs. 46.46 trillion. Currency in circulation was about Rs. 11.94 trillion, while deposits with banks were approximately Rs. 34.47 trillion. The greater part of what Pakistanis use as money does not consist of notes issued by the State Bank. It consists of claims recorded in the banking system. This distinction has profound consequences for our discussion of riba. Commercial-bank creation of deposit money should not automatically be declared riba. The Quran does not prescribe a reserve ratio, a central-bank structure or a particular technique for creating currency.  To equate fractional-reserve banking itself with riba would unnecessarily turn a question of monetary system into a theological declaration. The real objection is different. A society must ask whether the privilege of creating generally accepted purchasing power should be exercised primarily through private debt contracts; who receives the initial benefit of newly created purchasing power; towards which activities the new credit is directed; who absorbs the losses when excessive credit creation produces instability; and whether private institutions can earn a predetermined return from money whose creation depends ultimately upon the sovereign monetary and payment system. These are questions of political economy and distributive justice. Pakistan provides an especially revealing example. SBP’s provisional monetary aggregates at end-June 2026 recorded net government-sector borrowing of more than Rs. 37 trillion.  Net borrowing from scheduled banks was overwhelmingly larger than direct borrowing from SBP, while credit to the private sector stood at around Rs. 11.4 trillion. The precise categories require care in interpretation, but the broad structural message is difficult to miss: the banking system has become deeply intertwined with financing the State itself. Banks operate within an extraordinary circle. The State confers the banking licence, provides the settlement infrastructure, regulates deposits, maintains monetary stability and acts ultimately as guardian of systemic stability. Banks create deposit money through their financing operations and then deploy enormous resources in government securities carrying returns ultimately serviced through public revenues. The citizen appears at both ends of the transaction by providing deposits to the banking system and later pays taxes from which sovereign financial obligations are serviced. The arrangement may be perfectly lawful under the existing system, but a project seeking elimination of riba cannot ignore its structural implications. Conversion of conventional banks into Islamic banks does not, by itself, answer this problem. An Islamic deposit-taking institution can participate in the same process of deposit creation when it extends financing. If its balance sheet remains concentrated in sovereign instruments and if its returns remain indirectly anchored to the prevailing interest-rate structure, conversion of contractual terminology leaves the underlying monetary structure substantially intact. This is one reason why the proposal recently advanced by Muhammad Munir Ahmad for an alternative riba-free system deserves serious consideration. It correctly asks whether money creation and commercial financing should be separated. Its criticism of the privileges inherent in the existing banking structure identifies a problem much larger than the replacement of an interest-bearing loan with murabaha or ijarah. The proposed solution, however, requires considerable refinement. One possibility is a system under which transaction money is fully backed by sovereign money.  Current accounts used for salaries, business payments and ordinary transactions would represent money held for payment and safekeeping. Banks would not be permitted to use these balances to create additional financing. Investment would take place through an entirely different window. A person seeking a return would knowingly place funds in an investment account. Those funds could be employed in mudarabah, musharakah, leasing, trade finance and other genuine commercial arrangements. Return would arise from investment, ownership, enterprise or service rather than merely from allowing a bank to create a debt against a transaction deposit. This idea is neither historically unprecedented nor uniquely associated with Islamic economics. During the Great Depression, economists associated with what became known as the Chicago Plan proposed 100 per cent reserve backing for transaction deposits, expressly separating the monetary function of banks from their credit function. Irving Fisher became one of its prominent advocates.  Decades later, an International Monetary Fund (IMF) working paper by Jaromir Benes and Michael Kumhof revisited the proposal and modelled potential effects including greater control over credit cycles and reductions in private and public debt. The paper was research rather than IMF policy, but

Patriotism is not a loud noise that we hear only on the 14th of August. It is not only flags on the streets, or songs on television, or speeches in big grounds. Real patriotism is a quiet light that burns in the heart of a common man, every single day. It lives in the way we treat our country when no one is watching. It lives in the small choices we make from morning till night. Pakistan was not given to us as a gift. It was bought with blood, with tears, with the prayers of mothers and the sacrifices of fathers. Millions left their homes. Millions never returned. Today, the debt of that sacrifice is on us. And how do we pay that debt? Not always with great battles. Often, we pay it with small, honest, and consistent acts. Look around you. When a young boy in Lahore gets up early and sweeps the street in front of his house without waiting for anyone to tell him, that is patriotism. When a shopkeeper in Karachi refuses to sell expired medicine to a poor child, even when he could earn more, that is patriotism. When a teacher in Peshawar stays for ten extra minutes to explain one more sum to a weak student, that is patriotism. When a driver in Islamabad stops at the red light at 2 AM when the roads are empty, that is patriotism. The world may not clap for them. Cameras may not follow them. But Allah sees. And the nation grows stronger because of them. Consider our daily life. We waste water while brushing our teeth. We throw plastic on the road and then complain that the drains are blocked. We break the queue and then blame the system for being corrupt. But a true patriot asks a different question. He asks, “What can I do today?” He turns off the extra fan. He plants one tree in his street. He picks up one wrapper and puts it in the dustbin. One person doing this means nothing. But when two hundred and forty million people do this, rivers become clean, cities become beautiful, and the government saves billions that can go to schools and hospitals instead of cleaning our mess. Now look at our work. A nation is built in offices, in fields, in factories, and in classrooms. The doctor who treats every patient with the same care, whether he is rich or poor, is serving Pakistan. The engineer who builds a bridge that does not fall for fifty years is serving Pakistan. The farmer who works under the hot sun of Punjab and Sindh to grow wheat so that no child sleeps hungry is serving Pakistan. The coder in Lahore who earns dollars from clients abroad and brings that money back to Pakistan is serving Pakistan. Even the mother at home who raises her children with honesty and faith is serving Pakistan. These are not small jobs. These are the pillars of a nation. In today’s world, patriotism also lives on our phones. Every day we forward messages. Every day we post something. A patriot thinks before he types. He does not spread hate between provinces. He does not share a lie to get more likes. He speaks about Pakistan with pride, even when he is criticizing to improve. When a Pakistani student sits in London or Dubai and works hard and follows the law, he becomes the face of Pakistan. When he helps a stranger and says “I am from Pakistan” with his head high, he wins respect for all of us. We are a nation of diversity. We speak different languages. We wear different clothes. We eat different food. But we share one sky, one land, and one flag. True patriotism is when a Baloch, a Sindhi, a Punjabi, a Pashtun, and a Kashmiri sit at one table and say “We are Pakistani first.” It is when during floods, people from Gilgit send donations to people in Thar. No one asks your caste. No one asks your sect. We only ask, “How can we help?” That is the Pakistan of Quaid-e-Azam. That is the Pakistan we must protect. And what about our land? Our rivers, our mountains, our air? To harm them is to harm Pakistan. The patriot plants a tree. The patriot says no to plastic. The patriot keeps his mosque, his school, and his park clean. Because a dirty nation can never be a great nation. Dear readers, let us be clear. We do not need to do everything. But we must do something. Every day. Faith, Unity, Discipline. These were not just three words. They were a plan. Faith in Allah and in ourselves. Unity with each other despite our differences. And Discipline in our small, daily actions. Do not wait for a hero to come and fix everything. You are the hero. In your home. In your street. In your office. On 14th August we celebrate. But on 15th August, and 16th August, and every day after that, we must build. With honesty. With hard work. With love. Because nations are not built by what we say in one day. Nations are built by what we do in three hundred and sixty-five days.

By Tahseenullah For decades, labour migration in Pakistan has largely been viewed as a response to unemployment and poverty. While this perspective has served its purpose, it no longer reflects the realities of today’s global economy. In the twenty-first century, labour mobility has become far more than an economic necessity—it is a strategic investment in human capital, national competitiveness and economic diplomacy. Countries that can produce skilled, certified and globally competitive workers will hold a distinct advantage in an increasingly interconnected labour market. As ageing populations, declining fertility rates and persistent labour shortages reshape developed economies, demand for skilled workers is rising across Europe, East Asia and other advanced markets. Pakistan, with one of the world’s youngest populations, is well positioned to seize this opportunity. The real challenge is not whether Pakistan has enough young people willing to work abroad, but whether it can equip them with internationally recognised skills, qualifications, language proficiency and professional competencies that meet evolving global labour market demands. Pakistan’s labour migration journey began with the establishment of the Bureau of Emigration and Overseas Employment in 1971, following the Gulf oil boom. Since then, more than 15 million Pakistanis have migrated through regular channels, contributing significantly to infrastructure, healthcare, construction, transport and service sectors worldwide while improving the livelihoods of millions of families back home. Today, overseas employment remains one of Pakistan’s most important economic assets. According to BEOE, 862,625 Pakistanis migrated for employment in 2023, followed by 725,672 in 2024 and 762,499 in 2025, with early trends indicating sustained international demand in 2026. Meanwhile, the Pakistan Migration Report 2025 and the State Bank of Pakistan estimate workers’ remittances at approximately US$38.3 billion in FY2024–25, representing nearly 9.34 percent of GDP. These remittances strengthen foreign exchange reserves, reduce poverty and support macroeconomic stability. Yet labour migration has rarely been treated as a strategic pillar of Pakistan’s long-term economic planning. The global labour market is undergoing profound change. According to the World Economic Forum’s Future of Jobs Report 2025, demographic shifts, technological advances and the green transition will create millions of new employment opportunities over the coming decade. Healthcare professionals, engineers, IT specialists, skilled technicians, renewable energy workers, construction professionals and caregivers are expected to remain in particularly high demand. Pakistan possesses a valuable demographic dividend, with nearly two-thirds of its population under the age of 30. However, this advantage will only translate into economic gains through sustained investment in education, Technical and Vocational Education and Training (TVET), international certification, digital skills and language training. The challenge is clear. The Pakistan Migration Report 2025 shows that nearly two-thirds of Pakistani migrant workers remain low-skilled or unskilled. While their contribution is invaluable, low-skilled employment often results in lower wages, limited career progression and greater vulnerability to labour market shocks. In contrast, highly skilled migrants generally access better jobs, stronger labour protections and significantly higher earnings. Pakistan must therefore move beyond a traditional labour export model towards a human capital export strategy. Success should no longer be measured simply by the number of workers leaving the country, but by the quality, productivity and global competitiveness of its workforce. Achieving this transformation requires comprehensive reforms. TVET institutions must align training with international occupational standards and labour market needs. Language education in German, Japanese, Korean and Italian, alongside digital literacy, workplace ethics and intercultural communication, should become integral components of workforce development. Market diversification is equally important. While Gulf Cooperation Council countries will remain Pakistan’s primary labour destinations, excessive dependence on one region exposes the country to geopolitical uncertainty and labour market fluctuations. Pakistan should actively expand regular labour mobility partnerships with Europe, Japan, South Korea, Australia and Canada, where structural labour shortages continue to grow. Government-to-government labour mobility agreements should become a strategic priority. Such partnerships can enhance transparency, reduce recruitment costs, improve worker protection and strengthen employer confidence in Pakistani talent. Simultaneously, Pakistan should pursue mutual recognition of qualifications and internationally accepted skills certification to facilitate smoother labour market integration. Institutional coordination will also be essential. The Ministry of Overseas Pakistanis and Human Resource Development, together with the NAVTTC, provincial TEVTAs, Overseas Employment Promoters, the Ministry of Foreign Affairs and Pakistan’s overseas missions, should implement an integrated national labour mobility framework supported by labour market intelligence, digital recruitment platforms and evidence-based policymaking. Pakistan can draw valuable lessons from the Philippines, whose migration governance combines ethical recruitment, mandatory pre-departure orientation, comprehensive worker welfare and strong overseas support systems. Adapting these practices would strengthen Pakistan’s reputation as a reliable source of skilled and protected migrant workers. At the same time, addressing irregular migration must remain a national priority. Preventing dangerous migration routes requires expanding legal migration opportunities, strengthening career counselling, improving public awareness, dismantling human smuggling networks and ensuring aspiring migrants have access to reliable information and affordable recruitment services. Labour migration should no longer be viewed solely as a means of reducing unemployment or increasing remittances. It should be recognised as a cornerstone of Pakistan’s economic diplomacy, human capital development and long-term growth strategy. The countries that will lead the future of global labour mobility will not necessarily be those with the largest populations, but those that invest in producing highly skilled, internationally certified and globally competitive talent. Pakistan has already demonstrated its ability to contribute to the global workforce. The next step is to move beyond exporting labour to exporting talent. By investing in skills, strengthening institutions, diversifying labour markets and promoting ethical, well-governed migration, Pakistan can transform its demographic dividend into one of its greatest strategic advantages. The world is searching for talent. Pakistan has the youth. What it now needs is the vision to turn that potential into global human capital leadership. Tahseen Ullah is a development and migration sector practitioner specializing in labour mobility, migration governance, education and child protection.

Pakistan has a peculiar relationship with workplace merit. We talk about it constantly. Government departments are criticised for delaying promotions. Corporations are questioned over favouritism. Universities are urged to reward academic performance. Employers are told to retain talent. Media organisations routinely expose nepotism, extensions, political appointments and institutional injustice. But there is a question that is rarely asked: Do the organisations making these arguments follow the same standards inside their own walls? The question is particularly relevant to Pakistan’s media industry. Newspapers and television channels have considerable influence over how society understands fairness at work. They report on workers denied promotions, bureaucrats given extensions, senior officials superseded and institutions accused of favouritism. But journalism cannot demand accountability from everyone else while exempting itself from scrutiny. That is where the conversation around employee retention, promotions and extensions becomes uncomfortable. The Extension That Blocks an Entire Career Ladder In any hierarchical organisation, one senior position can determine the careers of dozens of people below it. When a person occupying a senior position retires, the organisation has several choices. It can promote someone from within. It can recruit externally. It can restructure the position. Or, where there is a genuine institutional requirement, it can retain the individual for a defined period. The problem begins when an exception becomes a culture. A six-month extension becomes another year. A temporary arrangement becomes a permanent arrangement. A retired employee is brought back. Another extension follows. Meanwhile, people below continue waiting. For them, the issue is not merely that someone has been allowed to continue working. It is that their own careers may have been placed on hold to accommodate someone else’s continued career. That distinction is often ignored in Pakistan. Even Dawn Has Written About This Problem Dawn itself has been among the publications highlighting the damage caused by prolonged temporary arrangements. In a May 2026 editorial titled “Ad hoc culture,” Dawn criticised the practice of keeping people in higher positions through prolonged temporary arrangements, noting that such practices can leave employees without formal promotion, financial benefits or recognition of seniority. It specifically highlighted the frustration of employees whose seniority is bypassed. That position is difficult to disagree with. In fact, it is precisely the position that responsible journalism should take. But it also raises a more uncomfortable question: What happens when the same principles are applied to the media organisations themselves? The Dawn Question Dawn has long presented itself as an institution committed to professional journalism, institutional accountability and workers’ rights. Its pages have repeatedly carried arguments in favour of merit-based promotions and against prolonged ad-hoc arrangements. A January 2026 Dawn editorial page contribution on academic promotions, for example, argued that delayed promotions erode meritocracy, demotivate employees and can drive talented professionals towards private institutions or overseas opportunities. In another recent editorial, Dawn argued that prolonged temporary arrangements can stagnate careers and deprive employees of financial progression and recognition. These are sound principles. But principles become meaningful only when they are applied consistently. And this is where, based on my own knowledge of the organisation, an uncomfortable contradiction deserves examination. Dawn’s senior management structure has itself seen prolonged extensions, while retired managers have, according to my knowledge, been brought back into employment in Lahore and elsewhere. That raises a straightforward question: If retaining retired or extended senior personnel is justified by institutional necessity, why should the same practice be criticised when governments or other organisations do it? And if prolonged extensions are capable of blocking the careers of younger employees in government departments, why would the principle suddenly cease to apply inside a media organisation? This is not an argument against experience. Nor is it an argument that every retired employee should automatically be removed. Experience has value. Institutional memory has value. A highly experienced editor or manager can be extremely difficult to replace. But institutional value cannot become a permanent justification for blocking succession. Fifteen Years Is a Long Time in Any Profession The question becomes even more significant when a senior position remains occupied for an exceptionally long period. From my own knowledge of Dawn, its editor has remained in the position for nearly 15 years through extensions. Again, the question is not whether an individual is competent. The question is whether an institution that advocates professional advancement should also have a mechanism for developing and promoting the next generation of leadership. Fifteen years is enough time for an entire generation of journalists to enter an organisation, build careers, become senior reporters, become editors and eventually expect to take on greater responsibility. If the top positions remain occupied indefinitely, where does that generation go? There is a very real distinction between retaining talent and preventing succession. A healthy institution must know the difference. The Supreme Court Has Now Entered This Conversation This is no longer merely an HR theory. Pakistan’s Supreme Court has recently addressed the issue in remarkably strong terms. In January 2026, the court ruled that government departments could not use administrative inefficiency and procedural delays as an excuse for denying employees timely consideration for promotion. It held that promotion is connected to merit, performance and operational requirements, and said employees should not suffer because a department failed to convene promotion committees or relied excessively on acting arrangements. Four months later, in May 2026, the Supreme Court went further. It held that prolonged ad-hoc, look-after, current-charge, acting-charge and additional-charge arrangements can amount to exploitation. The case involved a Pakistan Railways employee who had performed duties of a higher post for nearly eight years before receiving regular promotion. The court’s reasoning is important because it moves the debate beyond bureaucratic procedure. It is about human beings and their careers. A person who spends years doing higher-level work without receiving corresponding recognition, seniority or financial benefits is not merely dealing with an administrative inconvenience. Their career is being affected. What Happens to the Person Waiting Below? This is the part of the Pakistani workplace debate we often ignore. We discuss the person

The government’s claims of containing power-sector circular debt have not survived the test of its own year-end figures. During the fiscal year (FY) 2025–26, another Rs. 364 billion was added to the flow of circular debt. This happened despite the provision of Rs. 302 billion in subsidies and repeated assurances that operational improvements, tariff adjustments, negotiations with independent power producers and financial restructuring had brought the problem under control. According to the latest report, the gross addition of Rs. 364 billion was Rs. 319 billion, or 709 percent, higher than in the preceding year. After using Rs. 302 billion of public money to reduce the accumulated liability, the reported stock still increased by about Rs. 61 billion from its June 2025 level of Rs.1.614 trillion. These numbers expose the difference between managing the recorded stock and stopping the recurring flow. A subsidy can reduce the amount appearing in the circular-debt account on a particular date. It cannot remove the inefficiencies, payment defaults, regulatory delays and governance failures that create new liabilities every month. The Power Division had taken a very different position earlier. Responding to reports that circular debt had risen during July–November 2025, it described the increase as seasonal and maintained that such variations normally reversed during the second half of the financial year. Its official rebuttal predicted that the circular-debt position would be fully contained by June 2026, with no net addition to the overall stock. The financial year has ended with a gross flow of Rs. 364 billion and a net increase even after a large fiscal injection. The promised reversal did not take place. The language of containment concealed continued deterioration in the financial operations of the power sector. The reported composition of the increase is equally disturbing. Inefficiencies of power distribution companies caused losses of Rs. 262 billion, only Rs. 3 billion less than in the preceding year. Lower recovery of electricity bills added Rs. 64 billion. Interest charges contributed another Rs. 14 billion, while delays in tariff adjustments added Rs. 75 billion. A further Rs. 194 billion arose from non-payment by K-Electric, reportedly connected with the delay in determining its multi-year tariff. This cannot be classified as an unavoidable commercial loss. It represents a failure of regulation, contract administration and timely governmental decision-making. When tariff determinations, subsidy decisions or payment settlements are delayed, the resulting liability does not disappear. It moves through the electricity chain until it is recorded as circular debt and passed to taxpayers or consumers. The reported components and adjustments must be examined carefully when the complete official statement is released. The latest report available on ministry’s website is of April 2026. The Power Division has not placed even its one-page circular-debt reports from May to July 2026 on its website. Public discussion is consequently being conducted based on figures reported in the press. The government cannot demand acceptance of its success narrative while withholding the underlying data required testing it. The Rs. 302 billion subsidy used to contain the closing stock was nearly half of the approximately Rs. 630 billion collected in income tax from salaried persons during the same year. This comparison shows the real social cost of power-sector failure. Citizens who have no role in managing distribution companies, finalising tariffs or settling inter-company disputes are required to finance the consequences through taxation. They also pay through electricity tariffs, surcharges, fuel-price adjustments and declining service quality. Honest consumers are charged for theft, poor recoveries, technical losses and delayed official decisions. As tariffs rise, more households and businesses with adequate resources shift to rooftop solar systems. The grid is left with a shrinking base of paying consumers and a large stock of fixed capacity costs. Tariffs must then be raised further to recover those costs from fewer units sold. The policy response itself deepens the financial problem. For more than a decade, governments and the International Monetary Fund (IMF) have relied heavily on tariff increases, periodic adjustments, withdrawal of subsidies and additional surcharges. These measures may narrow the accounting gap temporarily, but they do not establish commercial discipline within distribution companies or personal accountability for persistent losses. The IMF reportedly allowed up to Rs. 400 billion to be added to the circular-debt flow during FY 2025–26, while requiring the government to neutralise the addition through budgetary subsidies. This approach turns circular debt into an exercise in fiscal presentation. A liability generated inside the electricity system is paid from the federal budget and then described as contained. The loss has not been eliminated. Its location has changed. The same problem arises with the Rs. 1.225 trillion circular-debt settlement plan. Refinancing expensive liabilities at more favourable rates can reduce financing costs and provide immediate liquidity. It does not constitute retirement of debt in any economic sense when the replacement financing has to be repaid over six years through charges imposed on electricity consumers. Pakistan will be servicing yesterday’s circular debt while the unreformed system continues creating fresh liabilities. Financial engineering is being presented as reform because it postpones recognition of the full fiscal burden. Liquidity becomes a substitute for correcting the institutions responsible for the crisis. The proposed privatisation of the distribution companies also requires closer scrutiny. The government has started with Faisalabad, Gujranwala and Islamabad electricity supply companies, which are among the relatively better-performing entities. Selling profitable or manageable companies while retaining those responsible for the largest losses will not remove the structural deficit. It may deprive the public sector of its stronger revenue-generating assets while leaving taxpayers responsible for the weakest companies. Privatisation can improve performance where there is transparent valuation, effective regulation and genuine transfer of commercial risk. It cannot succeed if private investors acquire the sound operations while the state remains responsible for accumulated liabilities, political interference, theft-prone areas and unrecoverable receivables. That would amount to privatisation of gains and socialisation of losses. A credible reform programme must begin with full disclosure. Monthly circular-debt reports should identify, company by company, transmission and distribution losses, recovery ratios, unpaid