Economist Ashfaq Tola has proposed a sharp adjustment in Pakistan’s exchange rate, suggesting the rupee be set at Rs. 250 per US dollar, alongside a Rs. 10 per dollar incentive for remittances sent through formal banking channels.

In a model budget framework for FY27, he argues that aligning the exchange rate at this level could help reduce inflation by up to 6 percent while improving foreign exchange inflows by discouraging informal transfer systems such as hawala and hundi.

The proposal highlights the structural tension in Pakistan’s economy between growth needs and International Monetary Fund–backed fiscal discipline. It warns that strict IMF-style adjustments may strain long-term economic stability.

The model budget estimates that IMF-driven policies could keep the fiscal deficit around 4.4 percent of GDP, while an alternative domestic reform path—focused on tax restructuring and revenue expansion—could bring it down to 2.1 percent of GDP.

It also recommends broad tax relief for the information technology sector to boost exports, while suggesting increased taxation in agriculture to widen the revenue base. The plan stresses that reducing losses in the energy sector is essential for meaningful fiscal consolidation.

Additional proposals include accelerating privatization of state-owned enterprises to ease pressure on public finances and removing regulatory barriers to attract private investment. The document also suggests offering tax amnesty or incentives on repatriated foreign assets, which it claims could unlock up to $20 billion in inflows.