Page 80 - CMA Journal (Mar-Apr 2026)

SME sector and agriculture sector has been left to private External public debt stands at around USD 92 billion,
nanciers. This practice is against the basic Islamic tenets. representing about 70% of total public debt to GDP in 2026.
Where the Quran permits mortgage of assets against loans it The current account in Pakistan averaged USD -783.73
also advises lenders to be lenient in hard economic times million from 1976 until 2025. The situation due to the recent
and instead of foreclosure, give time for recovery. Iran Gulf war has changed which may result in lower labour
remittances.
The settlement of nancial disputes and banking loans too
are out of line with Islamic tenets. Instead of banking courts, This development also needs to be accommodated in
SBP should have a dispute resolution department that Pakistan's policy actions. If China were to source just 15% of
decides matters within two to three sittings between the its total agricultural imports of USD 204 billion (2025) from
banks and the borrower. At most, retired judges of High Pakistan, the country would have no current account de cit.
Courts may be deputed for dispute resolution. A related problem is that yield per hectare in Pakistan is
among the lowest in the region. Chinese contribution could
On the investment side, how a bank should share pro t with
improve productivity and bring greater wealth to farmers.
a borrower is a complex question. However, simulation
modelling for industry and trade averages can be drawn as a Moreover, signi cant oil and gas discoveries during
benchmark for bank and borrower pro t sharing. 2025–2026, following a three-year survey conducted with a
foreign partner, have con rmed substantial reserves in
In ation normally results from cost push factors, such as
Pakistan's territorial waters, often described as a potentially
devaluation or supply disruption. Controlling in ation
fourth-largest global nd. These new nds of gas, oil, copper
through monetary policies of SBP is an inappropriate tool
and gold (Reko Diq) would be extremely helpful in enabling
according to Islamic tenets.
Pakistan to stand on its own feet.
Where the Quran explicitly forbids interest, Pakistan, instead
Though Pakistan was thriving in the 1950s as an Asian tiger, it
of depending on its own strength, resources and blessings of
has been left far behind in economic growth by Germany,
Allah, has adopted the western model of managing its
Japan, South Korea and even India. What is Pakistan's real
nances. In the fties, Pakistan gave a loan to Germany to
problem of governance? Consider that the USA with a
help its development program, today Pakistan's debt trap is
population of 330 million has 50 states whereas Pakistan
as follows: Domestic Debt Rs 54.5 trillion (2025) plus Rs 1.15
with 250 million people has only 4 provinces. The US has on
trillion in Treasury bills held by banks. Pakistan's annual
average 6.6 million people per state. By this scale, Pakistan
budget is Rs 17.57 trillion (2025) with a resource de cit of Rs
should have 37 provinces. If not 37, at least 20 provinces
6.3 trillion, meaning Pakistan is short of this amount in
would be needed for better governance. The political
annual tax collection.
landscape is signi cantly in uenced by established power
An ideal situation would be that government saving structures within both provincial and national assemblies,
schemes be abolished. There should be no Treasury bills which may limit the inclusion of emerging urban
issued by SBP and all this money be deposited with regular perspectives. At the same time, different regions such as
commercial banks where depositors would receive 13% (as Balochistan and Khyber Pakhtunkhwa continue to express
illustrated above with HBL) or more on their deposits. These concerns and demand greater representation and
deposits should be utilized for economic growth rather than development within the existing system. Unless governance
funding government expenditure. and institutional reforms evolve in a more inclusive
direction, these disparities may continue to create political
Pakistan's tax to GDP ratio in 2024 was 10.3% against that of and administrative challenges with broader national
Turkey at 23.5% in 2023. Innovative methods need to be implications.
designed to follow Turkey's example in addressing the de cit
of Rs 6.3 trillion. The four sectors de ned are agriculture Unless the above-mentioned challenges are addressed, the
(25%), industry (25%) and services (50%) of GDP. Though effective adoption of an Islamic banking system and broader
industry is largely covered, the other two sectors, agriculture
and services, need to be seriously reviewed for taxation. About the Author: Mr. Jalal Ahmed Khan is a senior Fellow
member and former Executive Director of ICMA. He is presently a
Transport is largely ignored, but it does use diesel, which can
faculty member at PAF-KIET University.
be considered a means of taxation for this sector.

78 ICMA’s Chartered Management Accountant, Mar-Apr 2026