Pakistan is expected to generate more than Rs. 700 billion in additional revenue as part of fiscal tightening measures discussed with the International Monetary Fund (IMF) for the FY2026–27 budget.
According to the findings of recent discussions between Islamabad and an IMF mission led by Iva Petrova, the country will need to implement broader tax reforms and strengthen revenue collection to meet its fiscal targets.
The talks, held in Islamabad, focused on economic developments, budget planning, and reform progress under the Extended Fund Facility and Resilience and Sustainability Facility programs.
The IMF reaffirmed Pakistan’s commitment to achieving a primary budget surplus of 2% of GDP in FY27, a key condition aimed at improving fiscal stability and economic resilience.
To achieve this target, the Fund recommended expanding the tax base, improving tax administration, and enhancing public financial management at both federal and provincial levels. Officials indicated that around 0.6% of GDP in additional revenue, or over Rs. 700 billion, will be required to address weak tax growth.
The IMF stressed that the adjustment should primarily come from widening the tax net rather than increasing tax rates on existing taxpayers.
On expenditure, the Fund advised maintaining overall spending discipline while allowing targeted increases in health, education, and social protection programs. It also cautioned that low-priority development projects may need to be cut if revenue targets are missed.
The IMF further highlighted the importance of exchange rate flexibility, stronger foreign exchange markets, and maintaining fiscal buffers against risks such as rising energy prices and regional uncertainty.
Both sides also reviewed structural reforms, including energy sector restructuring, state-owned enterprise reforms, financial sector improvements, and market liberalization measures. The next IMF review mission is expected in the second half of 2026.
