Stop vilifying a dependable partner in progress

In a country grappling with chronic fiscal shortfalls and economic instability, one sector continues to underwrite national resilience quietly, yet receives little credit and frequent criticism, it is the Pakistani banking industry, the largest taxpayer and a vital anchor of financial stability. It is more often maligned than acknowledged. This paradox is not just unfair; it is also harmful, and it is time for a serious rethink. In 2024 alone, the banking sector, comprising commercial banks, development finance institutions (DFIs), and microfinance institutions, contributed an astonishing Rs. 1.6 trillion to the national exchequer. This includes Rs 856 billion in direct taxes, Rs 63 billion in sales and excise duties, and over Rs 685 billion in withholding tax collected and paid. To put that in perspective: that is nearly five times the sector’s tax contribution in 2021. Despite this unmatched contribution, banks face the highest effective tax rate in the economy, currently at 54 percent, nearly double the standard 29 percent applied to most other sectors. This is not just disproportionate; it is counterproductive. Penalizing a transparent and tax-compliant sector that supports government financing, small businesses, agriculture, and digital transformation ultimately weakens the very economy we are trying to stabilize. We are being taxed at rates nearly double other sectors. Taxation must be based on income, not balance sheet size or political expediency. We are partners in progress, not targets for fiscal patchwork. Critics frequently accuse banks of prioritizing investment in government securities over private sector lending. However, such arguments ignore Pakistan’s deeper structural challenges: a persistently wide fiscal deficit, a narrow and undocumented tax base, and underdeveloped capital markets. In FY24, banks financed over 99 percent of the government’s budget deficit, ensuring essential state functions–defense, pensions, and social protection–remained operational. This is not a diversion of resources; it is a lifeline. Private sector lending is not being neglected–it is being approached cautiously, in line with ground realities. In an environment where legal enforcement is weak, documentation is limited, and credit risk is high, sovereign lending remains the more prudent and regulatory encouraged route. Until the broader economic architecture is fixed, banks cannot be expected to take unmanageable risks for political optics. With 54 percent of the banks’ income directed to the government, it is only fair that we are treated as partners. Whenever the government has called upon us, we have stepped up. We remain committed to contributing to Pakistan’s progress, and we trust our efforts will be acknowledged. Banks employ over 200,000 people across the country and are at the forefront of initiatives to promote financial inclusion, SME growth, women’s banking, and digitization. While no sector is perfect and service delivery must continue to improve, painting all banks as exploitative institutions is inaccurate and unhelpful. It is important to remember that the banking industry is among the most heavily regulated and audited sectors in Pakistan. Its profits, often framed as excessive, are a reflection of efficiency and risk management. Profitability is not a red flag—it is a precondition for sustained lending, innovation, and national resilience. The broader issue is this: when one of the few transparent, tax-compliant sectors is disproportionately burdened, while vast swathes of the informal economy remain untaxed and unregulated, the incentive structure becomes warped. No economy can thrive if responsibility is concentrated on a narrow formal base while the rest operates in opacity. Pakistan’s banks are not asking for applause. They are asking for fairness—an equitable tax structure, policy consistency, and recognition of their indispensable role in economic development. The banking sector has delivered when it mattered most. It deserves policy support, not punitive treatment. It is time we stop vilifying the banking sector.