Pakistan’s Federal Budget for FY26 has been heralded as the nation’s first “climate budget,” a significant step in embedding environmental considerations into fiscal policy. On the surface, the allocations suggest a genuine pivot towards climate action: a remarkable 183% increase in mitigation spending to Rs603 billion, an 83% rise in adaptation funds to Rs85.4 billion, and additional allocations for supporting sectors like awareness and capacity building. The integration of a Climate Budget Tagging (CBT) system into the government’s financial management software, with over 5,000 federal cost centers tagged, further solidifies this commitment. These are indeed commendable strides, placing Pakistan among the early movers in developing economies to formalize climate considerations within its budgetary framework.

However, a closer look reveals a more complex, and at times contradictory, picture. While the increase in mitigation and adaptation funding is welcome, the substantial 30% cut in disaster preparedness, bringing it down to Rs33.2 billion, raises serious concerns for a country consistently ranked among the most vulnerable to climate disasters. This shift towards post-disaster rehabilitation (seeing a 157% increase) rather than preventative measures could prove costly in the long run.

Furthermore, critics point to a “tax hunger” within the budget, with measures like the carbon levy on petroleum products and a 10% tax on imported solar panels being viewed more as indirect taxation than genuine steps towards sustainability. The continued reliance on petroleum levies for a significant portion of “green revenue” creates a troubling dependency on fossil fuels to fund the very transition away from them.

Another key concern is the overwhelming focus on mitigation (87% of the climate budget measures) at the expense of adaptation. For a highly climate-vulnerable country like Pakistan, adaptation—such as sustainable flood management and agricultural resilience—is paramount. The neglect of these areas, alongside a significant cut in forestry programs despite alarming deforestation rates, underscores a disconnect between the budget’s stated climate ambitions and the on-ground realities.

While the FY26 budget marks a crucial institutional reform, particularly with the rollout of the Climate Public Investment Management Assessment (CPIMA) framework, its effectiveness will hinge on transparent tagging, a strategic prioritization of preventive spending, diversification of revenue streams away from fossil fuels, and the development of a robust domestic climate finance market. Pakistan’s climate challenge is immense, demanding not just a “climate budget” in name, but a truly comprehensive, well-executed, and balanced approach to ensure a resilient and sustainable future.