Pakistan plans to raise tax-to-GDP ratio to 11 percent this year amid economic reform push

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Updated 17 October 2025
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Pakistan plans to raise tax-to-GDP ratio to 11 percent this year amid economic reform push

  • Pakistan has one of the lowest tax-to-GDP ratios in the region, despite a population of over 240 million
  • In June, the government had set a record-high tax collection target of $47.4 billion for the year 2025–26

KARACHI: Pakistan intends to increase its tax-to-gross domestic product ratio from the existing 10.2 percent to 11 percent this year, Finance Minister Muhammad Aurangzeb said on Thursday, as Islamabad pushes for economic reforms.

Pakistan has lately introduced several reforms to ensure economic stability and to meet structural benchmarks under a $7 billion International Monetary Fund (IMF) program Islamabad secured last year.

The South Asian country has one of the lowest tax-to-GDP ratios in the region, despite a population of more than 240 million, and has often failed to meet its tax collection targets.

Speaking at the Atlantic Council in Washington, Aurangzeb outlined initiatives to bring agriculture, retail and real-estate sectors into the tax net, improve compliance through technology and AI-driven analytics.

“He reaffirmed the government’s commitment to raise the tax-to-GDP ratio from 10.2 percent to 11 percent this year, and to 13 percent over the medium term, ensuring fiscal sustainability,” the Pakistani finance ministry said.

In June, Prime Minister Shehbaz Sharif’s government set a record-high tax collection target of Rs14.13 trillion ($47.4 billion) for the fiscal year 2025–26, marking a 9 percent increase from the previous year. Officials say meeting this goal is essential to reducing reliance on external debt and ensuring long-term fiscal sustainability.

Since then, the prime minister has approved modern digital ecosystem for the revenue watchdog to increase its collection and the launch of simplified digital tax returns to increase compliance and widen the country’s narrow tax base.

Pakistan’s economy has lately shown some signs of stabilization under a $7 billion IMF bailout. The program helped ease fears of default, strengthen foreign reserves and stabilize the rupee after two years of severe fiscal stress.

Inflation has eased from record highs, and the government is moving ahead with privatization, tax and energy reforms, and digitalization drives, all aimed at restoring credibility among investors and lenders.

The finance minister said the government’s disciplined fiscal management has restored confidence, improved sovereign spreads and contributed to the first current account surplus in 14 years.

“On monetary and exchange rate policy, Senator Aurangzeb reaffirmed the government’s commitment to maintaining a competitive, market-based exchange rate under the oversight of the State Bank of Pakistan, adding that productivity gains and structural reforms are as vital as external price competitiveness in sustaining export growth,” the finance ministry said.


Walnut tree remains ‘under arrest’ for over a century, living symbol of colonial power in Pakistan

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Walnut tree remains ‘under arrest’ for over a century, living symbol of colonial power in Pakistan

  • British officer is said to have ordered chaining of the tree in 1898, a reminder of the absolute authority and psychological control enforced under colonial rule in Khyber Pass region
  • Locals and historians say the shackled tree survives as a physical memory of the Frontier Crimes Regulation era, when even nature could be punished to discipline subjects and display power

LANDI KOTAL, KHYBER: In the military cantonment of Landi Kotal, close to Pakistan’s Torkham border crossing with Afghanistan and the mouth of the historic Khyber Pass, a single walnut tree stands bound in heavy iron chains.

It has been this way for more than a century, a surreal, almost absurd monument to the power structures and punitive imagination of the British Empire’s rule in the tribal frontier.

Black shackles still brace parts of its branches, giving it the appearance of a theatrical installation. To locals, it is a wound that never fully healed, a reminder that even nature could be punished when authority wished to show dominance.

Local oral histories trace the origin of this bizarre imprisonment to 1898, when a British officer named James Squid, allegedly intoxicated, believed the tree was moving toward him and instantly ordered it arrested. Soldiers carried out the instruction and the walnut tree has never been freed since.

Muhammad Sardar, the caretaker who oversees the site today, recounted the story as it has been passed down for generations.

“This British military official at that time was drunk and thought this walnut tree was moving toward him to attack him,” he told Arab News. “The officer ordered to arrest this tree, hence the soldiers had to obey the order and arrest this tree.”

Whether the event unfolded exactly as described is impossible to verify, but historians and residents agree on what the continued chaining represented: the unquestionable authority of colonial power.

A LAW THAT COULD BIND PEOPLE — AND TREES

Landi Kotal was one of the most militarized points of the British-controlled frontier, a strategic chokepoint along the Khyber Pass, a route armies, traders and empires have used for thousands of years. To control the region, the British introduced the Frontier Crimes Regulation (FCR), a law that denied locals the right to appeal, hire lawyers or challenge government decisions. Entire tribes could be punished for the suspected action of one member.

The chained walnut tree is often interpreted as a physical embodiment of that era: a warning made visible.

Dr. Syed Waqar Ali Shah, Assistant Professor of History at the University of Peshawar, said the symbolism was deliberate.

“It was an assertion of their [British] authority, it was a symbol of their power. Right. It’s a funny thing as well, because it’s something which was under the influence of some intoxication,” he explained.

“The officer behaved or gave orders for the imprisonment of that particular tree under the influence of some intoxicants.”

Dr. Shah continued:

“It was something which was a symbol of colonial authority, assertion of their authority, of bureaucratic diplomacy, a symbol of their bureaucratic strength and power, and maybe some cultural encounter as well.”

He added that such displays endured because “it was a cultural link between the locals and the colonial power. So it was a reflection of that. But later on, they continued with it in the presence of FCR (Frontier Crimes Regulation) and regulations like this.”

Even once the officer sobered, the chains remained.

Dr. Shah believes that was intentional: psychological messaging meant to instill conformity and fear in people living under colonial law.

“Their objective and purpose was to make it a symbol of discipline for the masses. It was an exhibition of power, a sheer exhibition of power, a symbol that if we can do this to something which was inhuman … if they can deal with a tree like this, so the general public, they should be aware that discipline is very important.”

Landi Kotal’s older residents say their fathers and grandfathers retold the story long before Pakistan existed and long before independence movements dismantled the Raj.

Usman Khan Shinwari, a 26-year-old shopkeeper, said the story continues to live in households like a family inheritance.

“My grandfather would often narrate this story of the arrested tree,” he recalled. “My grandfather would say that it shows how the then rulers were treating the locals and what our ancestors had endured.”

Over a century later, long after the end of British rule and the formal abolition of the Frontier Crimes Regulation in 2018, the walnut tree remains exactly where it was chained, part spectacle, part scar.

Tourists sometimes come to photograph it. Others stand silently before it.

But for many in Khyber, it is neither attraction nor curiosity.

It is proof that power once flowed one way only. A tree could be punished, so people learned not to resist.