The International Monetary Fund has warned that Pakistan’s federal tax revenue is likely to remain largely stagnant over the next five years, despite recent improvements in the overall tax-to-GDP ratio. Although fiscal reforms raised collections in FY25, the Fund believes future revenue momentum will increasingly depend on stronger provincial tax performance rather than federal expansion. This outlook reflects structural limits within the existing tax base and persistent administrative challenges faced by federal authorities.
According to IMF estimates, Federal Board of Revenue collections increased from 8.9 percent of GDP in FY24 to 10.3 percent in FY25, supported by revenue measures worth nearly Rs2.5 trillion. However, the figure still missed the programme target of 10.7 percent, highlighting gaps between policy intent and actual collection outcomes. For the current fiscal year, the Fund projects FBR revenue at 11.1 percent of GDP, a level expected to remain unchanged through FY30.
Read more : IMF warns tax-to-GDP ratio likely to stagnate
In nominal terms, FBR revenue rose from Rs9.3 trillion in FY24 to Rs11.74 trillion in FY25 and is estimated at Rs13.98 trillion this year. Even so, the IMF expects a shortfall of Rs328 billion under prevailing economic assumptions and policy conditions. The Fund noted that FY25 collections missed budget estimates by Rs1.224 trillion, reflecting both macroeconomic and administrative weaknesses.
The IMF attributed around Rs850 billion of the revenue gap to faster-than-expected disinflation and weaker economic growth, which reduced taxable activity across sectors. Meanwhile, nearly Rs380 billion stemmed from enforcement challenges, including delays in tax litigation and limited compliance improvements. Despite this, overall revenues rose to 15.9 percent of GDP in FY25, supported by higher petroleum levy collections and increased central bank profit transfers.
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Looking ahead, the Fund expects provinces to drive most future revenue growth through agricultural income tax reforms and expanded sales taxes on services. Provincial tax collection is projected to rise from 0.9 percent of GDP in FY25 to 1.6 percent by FY28, before stabilising through FY30. Based on these trends, the consolidated fiscal deficit is expected to narrow gradually to 2.8 percent of GDP by FY30, signaling cautious fiscal improvement.