The International Monetary Fund (IMF) is considering reducing Pakistan’s tax collection target to below Rs12.5 trillion due to sluggish economic activity and a Rs606 billion shortfall in revenue. The final decision depends on the Finance Ministry’s ability to cut expenditures while maintaining a Rs1.2 trillion primary budget surplus, a key condition of the IMF program.
Discussions between the IMF and Pakistani authorities focused on tax collection, energy sector performance, and external financing needs. The government proposed reducing the tax target by Rs579 billion, but the IMF indicated a possible cut of Rs435 billion. The Federal Board of Revenue (FBR) assured the IMF that March’s tax target is achievable, though shortfalls in April and May might need recovery in June.
To boost revenue, the FBR proposed lowering tax rates on tobacco, beverages, and construction, aiming to generate Rs90 billion through increased sales. It also expects to recover Rs300 billion from pending court cases. Despite imposing Rs1.3 trillion in new taxes, mostly burdening salaried individuals, the government has struggled to meet revenue goals. In the energy sector, the Power Division assured the IMF that circular debt will stay below Rs2.429 trillion this fiscal year. The IMF also requested future projections for the 2025-26 fiscal year. Both sides continue negotiations to balance fiscal discipline while addressing Pakistan’s economic challenges.