Pakistan and the International Monetary Fund (IMF) are close to reaching a staff-level agreement to revise the Federal Board of Revenue’s tax target to Rs13.45 trillion for FY2025-26, reflecting ongoing revenue shortfalls and economic pressures.
The revised target relates to the collection goals of the Federal Board of Revenue (FBR) under Pakistan’s $7 billion Extended Fund Facility (EFF) program with the IMF. The development comes as virtual negotiations between Islamabad and IMF officials continue.
Initially, Parliament had approved an FBR tax collection target of Rs14.13 trillion for the fiscal year. However, due to revenue gaps, the target was first revised down to Rs13.979 trillion earlier this year. Current discussions now point to a second downward revision to Rs13.45 trillion.
Under the updated projections, Pakistan’s tax-to-GDP ratio is expected to reach 10.6% by June 2026, slightly higher than last year’s 10.3%, but still below the previously agreed 11% target with the IMF.
IMF officials have reportedly expressed concerns about Pakistan’s ability to achieve higher revenue targets amid inflation pressures, economic uncertainty, and implementation challenges in tax reforms. The lender has also questioned certain one-time revenue measures, suggesting they may not provide a sustainable solution without broader structural reforms.
To address the shortfall, the government is considering several policy measures, including adjusting expenditures and expanding the tax base. Authorities are exploring steps to bring more traders and small businesses into the formal tax system, possibly through digital invoicing and point-of-sale integration to improve transparency and compliance.
Pakistan’s economic outlook remains mixed. While GDP growth has shown early signs of resilience in the first months of the fiscal year, the country still faces external challenges such as global market volatility and geopolitical tensions.
Meanwhile, consumer inflation is projected to remain between 7% and 7.5%, slightly higher than earlier estimates due to rising global commodity prices and economic uncertainty.
