THE attack was audacious and well-coordinated. On the night of May 9, terrorists struck a police outpost in KP’s Bannu district, martyring 15 officers and injuring three, according to official reports. An explosive-laden truck rammed into the post, followed by what seems to have been a coordinated assault from multiple directions involving heavy weaponry and drones.
This suggests sophistication in terrorist tactics, and it seems the sole purpose of the attack was to cause maximum casualties. It is yet another grim reminder of how fraught the security situation remains in the province, where terrorists have repeatedly attempted to challenge the state’s writ.
The human cost, borne once again by police families, cannot be measured. Unfortunately, without a successful counterterrorism plan, chances of similar attacks by terrorists remain very high. The state must ensure that the perpetrators are brought swiftly to justice.
The civilian leadership was quick to condemn the attack, express sorrow and vow to eliminate terrorism. The president attributed the attack to Indian sponsorship and Afghan Taliban sanctuary — accusations that have now become routine in official statements following such incidents. He made it clear that Pakistan would “target not only the terrorists, but also their facilitators and sponsors”. Such pronouncements, too, have become familiar.
While the assertions themselves are certainly not unfounded, what is missing is decisive action on the ground against the terrorists who frequently operate in groups. And such action is not possible without deploying a robust intelligence-gathering strategy and coordinated planning involving all branches of security.
Furthermore, a sociopolitical diagnosis of what is going wrong in the western provinces needs to be shared with the Pakistani public to foster a wider understanding of the roots of this malaise. The state needs to devise a comprehensive response strategy to the emergent threats from terrorists, and this can only be achieved when there is broad buy-in from different stakeholders in Pakistan’s internal security calculus. The messaging from all branches of the state needs to be targeted and consistent.
Unfortunately, it seems that we are confusing the different fault lines that threaten internal cohesion. The security narrative and strategy of the KP government diverges considerably from the state’s position, with the resulting dissonance providing emboldened malign actors greater space to operate; the rising toll from terrorist attacks represents the costs it is imposing on the country.
Repeated vows to eliminate terrorism will remain insufficient as long as there is no united front to back them up with. There is also a dire need for a cohesive anti-terror policy that provides zero room for confusion or double games. Clearance operations continue in problem areas to rid them of terrorists, but without a whole-of-nation approach, eradicating this menace remains an uphill challenge.
Indian Prime Minister Narendra Modi will embark this week on a multi-nation tour to the United Arab Emirates and four European countries, officials said on Monday.
Modi will start his whirlwind tour from the UAE — where a 4.5 million-strong Indian community lives — on Friday, India’s foreign ministry said in a statement.
Modi will meet with the UAE’s leader, Sheikh Mohamed bin Zayed Al Nahyan, with energy cooperation high on the agenda amid global supply disruptions caused by the Middle East war.
“The visit will serve to promote the significant trade and investment linkages between the two countries,” the statement said.
The premier will then travel to the Netherlands between May 15 and 17 on his second visit there since 2017, with defence, semiconductors and “a strategic partnership on water” between the two countries on the agenda.
Modi’s visit “early in the tenure of the new government will provide an opportunity to further deepen and expand” India’s partnership with the Dutch, the ministry said.
Bilateral trade with the Netherlands — India’s 4th largest investor from Europe — stood at $27.8 billion last year.
Modi then heads to Sweden on May 17 for a two-day visit to hold talks with Prime Minister Ulf Kristersson.
The pair will address the European Round Table for Industry, a major business leaders’ forum, along with European Commission President Ursula von der Leyen, the statement said.
On May 18, Modi will arrive in Norway for the third India-Nordic Summit.
It will be his first visit to the country and first by an Indian prime minister in 43 years. The final leg of the week-long tour will be Italy, on May 19-20.
“The visit takes place in the backdrop of a strong momentum in bilateral ties with both sides proactively implementing the Joint Strategic Action Plan 2025-2029,” India’s foreign ministry said.
The plan seeks to boost bilateral trade and cooperation in defence and security, besides clean energy and technology.
The conflict in the Middle East has piled pressure on India’s economy, and Modi on Sunday urged the Indian population of 1.4 billion to reduce petrol and diesel consumption amid supply disruptions.
President Donald Trump on Monday said the ceasefire in the Middle East war was on “life support,” rejecting Iran’s latest counteroffer, which it said had included demands for the release of frozen assets and the end of a US blockade.
The president’s reaction to Iran’s position — itself a response to a US proposal — sent oil prices soaring and dashed hopes that a deal could be quickly negotiated to reopen the Strait of Hormuz to commercial shipping.
After slamming the response as “TOTALLY UNACCEPTABLE”, Trump insisted the US would see a “complete victory” over Iran, adding that the truce, which has largely halted fighting in the Gulf for over a month, was on its last legs.
“The ceasefire is on massive life support, where the doctor walks in and says, ‘Sir, your loved one has approximately a one per cent chance of living,’” he told reporters on Monday.
The developments unnerved global energy markets already thrown into chaos by the war and the overlapping blockades imposed by Iran and the US in the Strait of Hormuz — a vital conduit for oil and gas shipments.
“The energy supply shock that began in the first quarter is the largest the world has ever experienced,” the CEO and president of Saudi oil giant Aramco, Amin Nasser, told investors.
“If the Strait of Hormuz opens today, it will still take months for the market to rebalance, and if its opening is delayed by a few more weeks, then normalisation will last into 2027,” he said.
Hunger and starvation
Aside from energy, the world also faces a shortage of fertiliser, much of which comes from Gulf ports, and hence food for tens of millions of people.
Jorge Moreira da Silva, executive director of the United Nations Office for Project Services (UNOPS), told AFP there were just a few weeks left to avert a potentially “massive humanitarian crisis”.
“We may witness a crisis that will force 45 million more people into hunger and starvation.” Trump did not say what had offended him in Iran’s response, but Tehran’s foreign ministry said it had called for an end to the US naval blockade of its ports and to the war “across the region” — implying a halt to Israel’s strikes targeting Hezbollah in Lebanon.
Crucially, ministry spokesman Esmaeil Baqaei told reporters, Iran demanded the “release of assets belonging to the Iranian people, which have for years been unjustly trapped in foreign banks”.
This would not be just a return to the status quo before the United States and Israel launched the war on February 28, but a victory in the Islamic republic’s long-standing campaign against its economic isolation.
“We did not demand any concessions. The only thing we demanded was Iran’s legitimate rights,” Baqaei said.
An end to international sanctions would diminish Washington’s leverage over Tehran as it tries to secure a lasting end to Iran’s nuclear enrichment. The US, Israel and their allies have long accused Iran of seeking atomic weapons, an accusation Tehran has repeatedly denied.
‘It’s not over’
Israeli Prime Minister Benjamin Netanyahu insisted the conflict would not end until Iran’s nuclear facilities were destroyed.
“It’s not over, because there’s still nuclear material — enriched uranium — that has to be taken out of Iran,” he told US broadcaster CBS’s 60 Minutes.
“There’s still enrichment sites that have to be dismantled.”
The Wall Street Journal, citing people familiar with the matter, said Iran’s counter-proposal had included the possibility of diluting some of its highly enriched uranium, with the rest transferred to a third country.
Iran had sought guarantees that the transferred uranium would be returned if negotiations failed or Washington abandoned the agreement, sources told the Journal.
‘Restraint over’
US officials have stressed it would be “unacceptable” for Tehran to control the international waterway.
Trump told Fox News that he was considering reviving a short-lived US operation to escort oil and other commercial shipping through the Hormuz, but that he had not yet taken a final decision.
Saudi sources previously told AFP that Saudi Arabia had prohibited the US from using its airspace and bases for the operation the first time around over fears “it would just escalate the situation and would not work”.
The US Navy is also blockading Iran’s ports, at times firing on ships to disable them or boarding and diverting them.
In a social media post on Sunday, the spokesman for the Iranian parliament’s national security commission warned Washington: “Our restraint is over as of today.”
“Any attack on our vessels will trigger a strong and decisive Iranian response against American ships and bases,” Ebrahim Rezaei said.
Pakistan’s official tax discourse is mostly structured around a single question: how to collect more revenue. This narrow obsession with short-term revenue targets has produced a deeply distorted tax system that undermines growth, penalises documentation and increasingly shifts the burden onto those who are already visible, compliant and easy to tax.
Instead of broadening the tax base through structural reform, successive governments have relied on incremental, often distortionary measures, such as higher rates, additional levies, withholding taxes, and temporary surcharges, to squeeze immediate revenue from the formal economy.
Inevitably, the result is a regressive tax structure where compliant firms, salaried individuals and documented businesses shoulder a disproportionate burden while politically protected and informal sectors, including agriculture, retail, real estate and large parts of the services sector, remain lightly taxed despite their substantial contribution to GDP.
This imbalance is not accidental. It reflects deeper political economy distortions in which the state taxes what it can easily monitor rather than what it should tax. Weak enforcement capacity, fragmented administration and elite capture have allowed large sectors of the economy to remain under-taxed while the burden on documented taxpayers continues to intensify.
Lower, simpler taxes, with broader documentation, could generate stronger long-term revenues
The result is a vicious cycle. Higher tax rates encourage informality, while informality narrows the effective tax base further, forcing authorities to extract even more from existing taxpayers. Consequently, revenue extraction has replaced actual tax reform.
Pakistan’s sales tax regime has evolved into another example of how poorly designed taxation creates distortions not only for businesses but also for consumers. The ongoing debate around expanding the Third Schedule of the Sales Tax Act 1990 offers an important illustration of this problem.
The government is reportedly considering bringing more fast-moving consumer goods under the Third Schedule, where sales tax is charged based on the printed maximum retail price rather than through the conventional value-added system. Products such as cooking oil, dairy items, flour, frozen foods, tea whiteners and infant formula are expected to be added to the list after authorities observe stronger revenue performance from items like coffee already included under the regime.
Under the Third Schedule, tax is collected upfront at the manufacturing or import stage based on the printed retail price, reducing opportunities for under-invoicing and leakage further down the supply chain. For tax authorities struggling with an overwhelmingly undocumented retail sector, this offers predictability and administrative simplicity. But the significance of the issue extends beyond revenue collection.
The current sales tax system exposes a deeper structural flaw in Pakistan’s approach to taxation: consumers themselves remain largely invisible in policy design. Under the standard value-added sales tax framework, many everyday products do not carry clearly printed retail prices.
In an economy where a large majority of retailers operate informally and outside effective regulatory oversight, this creates significant room for arbitrary pricing and overcharging. Consumers frequently purchase essential items without knowing the actual intended retail price or whether excessive markups have been added at the retail stage.
In practice, this means consumers bear the burden of a dysfunctional tax and distribution system without even receiving basic price transparency in return. The Third Schedule addresses this issue by requiring retail prices to be printed directly on packaging. While designed primarily as a tax administration tool, it inadvertently introduces an important consumer protection mechanism.
A visible printed price reduces informational asymmetry between retailer and buyer, limits arbitrary markups and creates greater transparency at the point of sale. This matters particularly in the case of food and milk-related products, where frequent price changes directly affect household budgets already under severe pressure from inflation and stagnant incomes.
The irony is that Pakistan’s tax system often imposes substantial burdens on documented manufacturers while failing to protect either compliant businesses or consumers. Similarly, weak enforcement allows large wholesale and retail markets to remain outside the tax net, while compliant firms face increasing compliance costs, delayed refunds and multiple layers of taxation. As such, formal businesses absorb the cost of compliance, consumers face opaque pricing, and informal sectors continue operating with minimal accountability.
A sustainable tax system should not merely maximise extraction from documented sectors. It should promote fairness, simplicity, transparency and economic expansion. Excessive complexity discourages documentation, weakens compliance incentives and undermines public trust in the fiscal system.
The proposals put forward by the Overseas Investors Chamber of Commerce and Industry recently to simplify taxes, lower rates, and rationalise the sales tax regime reflect recognition that Pakistan’s current framework is economically unsustainable. Lower, simpler taxes, combined with broader documentation, can potentially generate stronger long-term revenues than increasingly punitive rates imposed on a shrinking compliant base.
Equally important, tax policy must begin recognising consumers as stakeholders rather than passive revenue sources.
Published in Dawn, The Business and Finance Weekly, May 11th, 2026
ISLAMABAD: The government is considering reducing the income tax burden on salaried individuals while refraining from increasing salaries and pensions in the upcoming budget, aiming to provide equitable fiscal relief to both public and private sector employees.
Informed sources told Dawn that Finance Minister Muhammad Aurangzeb has expressed a desire to lower tax rates and, if possible, raise the taxable income threshold for the salaried class in recognition of their significant contribution to revenue generation compared to retailers, wholesalers, exporters, and real estate players.
On the other hand, the government may keep salaries and pensions unchanged at current levels, using the resulting fiscal savings to provide tax relief instead. “There is no reason to increase salaries if it pushes employees into higher taxable income brackets, leaving government employees with little to no increase in take-home pay,” an official said. He added that with lower tax rates and higher taxable income thresholds, government employees would remain net beneficiaries even without a salary increase. “Government employees would not be worse off financially. That is neither the idea nor the intention,” he said.
Government salaries have increased by more than 60 per cent over the past four years, while private sector wages have generally stagnated amid high inflation and lower economic growth. The official said the tax policy office and some independent consultancy firms were working on various proposals to be discussed with the IMF mission during budget consultations beginning on May 15.
During this fiscal year, salaried class paid more than double the real estate taxes; even higher than the combined revenue from wholesalers, retailers and exporters
In addition, the development programme may be reduced further to a skeleton allocation, although final decisions on income tax, salaries, and development spending will become clearer during discussions with the IMF.
Last year, the federal government incurred an additional burden of more than Rs170 billion due to increases in salaries and pensions, while the provincial impact was more than double. An official noted even part of this amount could significantly reduce personal income tax burden.
The salaried class reportedly paid more than Rs425bn in taxes during the first three quarters of the current fiscal year — more than double the real estate sector’s contribution of about Rs200bn, and significantly higher than the combined revenue from wholesalers, retailers, and exporters. The salaried class has not only contributed the largest share of revenue but has also faced rising household expenses due to inflation, particularly after the onset of the Middle East crisis.
However, the official clarified that salary increases for PSDP-related employees, already notified by the government last month, would remain protected. After a four-year gap, the government last month approved a 20 to 35pc increase in the minimum salaries of employees working on development projects funded through the Public Sector Development Programme (PSDP), effective from July 1, 2026. Their pay packages were last revised on April 1, 2022.
Unlike other government employees, PSDP project employees previously faced cuts of up to 28pc in annual increments and 14pc in maximum salaries, according to an office memorandum issued by the finance ministry. During the same period, salaries of all other government employees, including those in finance ministry, increased by more than 60pc.
Indian Prime Minister Narendra Modi on Sunday urged the people of to cut down on petrol and diesel consumption amid supply disruptions due to the Middle East war.
India is one of the few countries in the region that has not increased the prices of petrol and diesel for domestic consumers or rationed supplies.
But it has increased prices of liquefied petroleum gas (LPG) — a primary cooking fuel in this country — after disruptions following the US-Israeli strikes on Iran, which led to Iran’s near-total blockade of the strategic Strait of Hormuz.
“We have to reduce our use of petrol and diesel. In cities with metro lines, we should try to travel by metro … If we must use a car, then we should try to car pool,” he said, addressing a gathering in southern Telangana state.
He added that restrictions on use were also necessary to save foreign currency spent on fuel imports.
“We must also place a strong emphasis on saving foreign exchange, as petrol and diesel have become so expensive globally.”
Modi also urged people to resume energy-saving schemes that were in place during the Covid-19 pandemic.
“We should prioritise work from home, online conferences, and virtual meetings again,” he said.
• Pakistan-India ties still trapped by Delhi’s intransigence, US failure to create political process after ceasefire • Islamabad’s institutional coherence shattered New Delhi’s illusions it was dealing with ‘weak neighbour’ • Water war takes centre stage as Indus treaty remains ‘unilaterally held in abeyance’
THE fighting lasted barely 90 hours, but the political consequences have proved far more durable.
While neither India nor Pakistan got what they expected from the flare-up of 2025, very few could have predicted that less than a year later, it would be Pakistan that emerged as the diplomatic lynchpin in the region, while India remained relegated to the side-lines.
Today, the relationship between the two neighbours remains frozen in an unusually rigid state; there is no war, but there is no diplomacy worth the name, either. The border is shut, trade is suspended and the Indus Waters Treaty remains unilaterally held in abeyance by New Delhi.
Military hotlines between the two countries are functioning, but they are emergency mechanisms rather than channels of engagement.
The resulting situation is not that of stability in the conventional sense, but a colder equilibrium sustained by deterrence, mistrust and the absence of political alternatives.
At the time the US facilitated ceasefire was announced, there was an understanding — at least according to US Secretary of State Marco Rubio’s announcement — that military de-escalation would be followed by talks at a neutral venue.
The US role for crisis management had been unusually visible and President Donald Trump publicly claimed credit for helping secure the ceasefire. So, there was a strong hope for a structured engagement between the two sides when the conflict ended.
But that process never materialised; India quickly rejected any suggestion of external mediation and insisted that the ceasefire understanding emerged through direct communication at the level of the two directors general of military operations.
It did so because New Delhi had long opposed internationalisation of the Kashmir dispute, and Trump’s public handling of the episode caused disquiet in Indian official circles.
Pakistan, meanwhile, believed that the conflict had restored a measure of strategic balance and that the post-war environment would generate a diplomatic momentum leading to improvement in the relationship and some semblance of normalisation.
But things did not turn out that way, mostly because Washington — after helping stop the fighting — had not invested sustained diplomatic capital in building a political framework around the ceasefire.
The impression left behind was that the US could help stop wars in South Asia, but may no longer possess either the leverage or the appetite to sustain a structured peace process afterwards.
India’s loss, Pakistan’s gain
Indian resistance to any formal mediatory role, meanwhile, further weakened the possibility of follow up diplomacy.
Besides Delhi’s refusal to accept any external mediation on the Kashmir dispute, Indian strategic thinking before May 2025 viewed Pakistan as a state weakened by internal instability, economic distress and persistent terrorist violence.
Therefore, the widening asymmetry in economic size, diplomatic influence and military modernisation encouraged a belief that India no longer needed engagement with Pakistan, and could manage the relationship through pressure, coercive signalling and diplomatic isolation instead.
The conflict, especially the way it ended, complicated that assumption.
Pakistan, to the surprise of many, demonstrated a great degree of institutional coherence during the crisis, absorbing military pressure, maintaining escalation control and mounting a coordinated response involving drones, missiles and air power. The conflict produced a narrative that Pakistan was strategically resilient, despite its internal difficulties.
Equally important, the crisis restored Pakistan’s geopolitical relevance. US engagement intensified during the conflict; China, Turkiye and Iran publicly backed Islamabad diplomatically and Gulf states quietly remained involved in de-escalation efforts.
Islamabad then went on to use the post-war period to improve its diplomatic visibility, particularly as regional tensions surrounding Iran later increased international interest in Islamabad’s intermediary role.
But none of this fundamentally altered the broader asymmetry between India and Pakistan. India still retains overwhelming long term advantages in economic weight and global positioning, but the conflict shattered the assumption, both in Delhi and around the world, that Pakistan had become “strategically irrelevant”.
An Indian military analyst, who has a good understanding of the Modi government’s thinking on foreign policy and security matters, told Dawn, “India is still operating on the assumption that that the asymmetry continues to favour it, though some important lessons were learnt from the conflict.”
Policymakers, he said, continue to believe that long-term geopolitical and economic trends remain firmly in India’s favour.
That explanation sums up the prevailing situation, where even after strategic recalibration, India has shown little interest in re-engagement with Pakistan.
Lack of engagement
Part of the reason for the India intransigence lies in its domestic politics, where engagement with Pakistan carries political costs.
In this situation, India prefers crisis management over structured dialogue.
Dr Moeed Yusuf, a former national security adviser, believes the present arrangement cannot hold indefinitely. “It is only sustainable till you don’t have the next crisis,” he said, arguing that the absence of political engagement leaves both sides vulnerable to another sudden confrontation.
He said India’s domestic political environment and years of anti-Pakistan narratives had narrowed the space for reconciliation, adding that while improving ties was essential for regional development, he was “not at all optimistic at this point”.
Moreover, the issue of unfounded terrorism allegations also remains central to that paralysis. India keeps the terrorism bogey alive and continues to maintain that meaningful improvement in relations is difficult without addressing its “concerns”.
Pakistan rightfully rejects those accusations, of which India has failed to provide any evidence, and argues that it has itself paid a heavy price over the past two decades in fighting militancy and terrorism.
Islamabad’s consistent position has been that sustained dialogue remains necessary precisely because of these disputes and risks. But the Indian hard line on the issue has narrowed the diplomatic space even further after the May 2025 conflict demonstrated how quickly such incidents can trigger wider military escalation.
In the absence of formal diplomacy, unofficial channels have continued to function quietly.
Over the past year, there have been periodic reports of Track 1.5 and Track 2 interactions involving retired officials, academics and policy interlocutors in places such as London, Muscat, Doha and Bangkok. These contacts have limited utility, but preserve communication during periods of estrangement and allow both sides to quietly test ideas and assess intentions.
After Kashmir, water becomes new front
Meanwhile, an important shift has quietly taken place in the substance of the bilateral dispute itself.
Kashmir remains unresolved and politically central, but has receded from active diplomacy after the conflict. In its place, water security has emerged as perhaps the most immediate and dangerous point of friction.
India’s decision to place the Indus Waters Treaty in abeyance marked a significant departure from past practice, since the treaty had survived nearly all previous wars and crises. Pakistan viewed the move as the “weaponisation of water” and warned that interference with the Indus system threatens millions dependent on agriculture, irrigation and hydropower.
Climate pressures and long term water insecurity have made the issue even more sensitive.
Former Federal Flood Commission chairman Ahmed Kamal said Pakistan had recently raised concerns with India over reduced flows in the Chenab. “Future cooperation on water security issue rests with India and would be determined by how it responds to Pakistan’s concern,” he said recalling that Pakistan’s commissioner for Indus waters recently took up the matter with India.
Ironically, however, water may also become one of the few issues capable of forcing limited engagement in the future. Even governments unwilling to resume broader political dialogue may eventually find it difficult to indefinitely avoid technical coordination over river flows, treaty obligations and data-sharing mechanisms.
While the space for comprehensive dialogue currently appears unlikely, narrower and more technical contacts involving water management, ceasefire stabilisation, crisis communication, humanitarian issues and limited security understandings may still be possible.
Outside actors including the US, Gulf states or European governments could potentially facilitate such engagement quietly with-out formally mediating the broader dispute.
None of this would resolve the underlying political conflict, but may help reduce the risk of another uncontrolled crisis in a region where trust has sharply eroded.
