IMF Urges Pakistan to Implement Major Tax Reforms Before Next Budget

Pakistan’s economic authorities have come under renewed pressure as the International Monetary Fund (IMF) has urged the government to deliver major tax reforms before the next federal budget, signaling that the upcoming fiscal framework will be closely tied to progress on tax simplification and transparency.

IMF Is Pushing for Reform as Pakistan continues its efforts to stabilize public finances, widen the tax net, and prepare for long term program engagement with the IMF. Over the past year, Pakistan has repeatedly committed to improving tax governance, reducing loopholes, and enhancing revenue collection areas the Fund believes remain heavily constrained by exemptions and administrative complexities.

An official familiar with the discussions noted,

“A simplified tax system is now essential for fiscal stability. Pakistan must remove distortions, reduce special treatments, and strengthen transparency.”

According to official documents, the IMF has asked Pakistan to unveil a comprehensive tax simplification strategy by May 2026. The strategy must outline how the government plans to reduce tax exemptions, minimize sector-specific concessions, and phase out heavy withholding and advance taxes that currently distort the system.

The Fund has also recommended structural improvements within the Federal Board of Revenue (FBR), including limiting its rule making powers, restructuring its internal hierarchy, reducing the authority of field offices, and publishing annual progress reports to ensure transparency and accountability.

Another major requirement is the timely publication of audit findings related to the Petroleum Levy, which the IMF wants released within one year to strengthen oversight of Pakistan’s fiscal operations.

These steps are seen as essential for rebuilding confidence in Pakistan’s economic governance and ensuring smoother progress toward future IMF financing arrangements.