The federal government is planning to seek relaxations from the International Monetary Fund (IMF) in the upcoming Budget 2026–27 (FY27) as part of a broader strategy to revive economic growth by reducing taxes, cutting power tariffs, and encouraging investment.
The push for IMF flexibility has gained momentum amid criticism that the IMF’s Extended Fund Facility constrained growth by raising taxes and increasing electricity and gas prices, which dampened business activity. Policymakers now believe that easing these pressures is essential to restore momentum in key sectors of the economy.
Entering the third year of its tenure, the government aims to lift economic growth to 5–6 percent, with a renewed focus on investment, job creation, and poverty reduction. Prime Minister Shehbaz Sharif has directed the Ministry of Finance and the Federal Board of Revenue to engage closely with the business community to attract both local and foreign investment, with export-led growth identified as the top priority.
Officials are exploring further reductions in power tariffs to improve industrial competitiveness and are considering tax incentives if sufficient fiscal space is secured. Under a draft policy, the government has proposed cutting the super tax on the manufacturing sector. The proposals also include raising the minimum income threshold and increasing the 10 percent super tax threshold from Rs. 500 million to Rs. 1.5 billion, with plans to halve the rate over the next four years.
A senior official said,
“The objective is to rebalance policy toward growth while maintaining macroeconomic stability.”
The government is also looking to ease inflationary pressures to support a reduction in the policy rate, making borrowing cheaper for businesses. Banks may be assigned specific lending targets to improve credit flows to the private sector and stimulate economic activity.
