ISLAMABAD: Pakistan and the International Monetary Fund are close to reaching a consensus on revising the country’s fiscal framework, including a reduction in the Federal Board of Revenue (FBR) tax collection target for the current fiscal year.
Revised Tax Target
Under the new proposal, the FBR’s tax collection target is expected to be reduced to Rs13.45 trillion by June 2026, down from the previously revised target of Rs13.97 trillion.
Initially, the government had set a target of Rs14.13 trillion, but revenue shortfalls have forced authorities to reconsider the goal.
Officials from Pakistan and the IMF are currently holding virtual negotiations to finalise a staff-level agreement (SLA) under the $7 billion Extended Fund Facility (EFF) programme.
The discussions aim to align Pakistan’s macroeconomic and fiscal framework with the lender’s requirements.
Revenue Shortfall
The FBR has faced a revenue gap of about Rs428 billion during the first eight months of the fiscal year, making it difficult to achieve the original tax-to-GDP target.
Under the revised projections:
Tax-to-GDP ratio: expected to reach 10.6% by June 2026
Previous IMF target: 11%
Tax-to-GDP in 2025: about 10.3%
Pakistan’s economic indicators are being reassessed as part of the IMF review.
Key projections include:
GDP growth: around 4% for the current fiscal year
Inflation: expected between 7% and 7.5%
Current account deficit: projected within 0–1% of GDP
Officials say inflation may rise due to increasing global fuel prices and geopolitical tensions, particularly the ongoing conflict in the Middle East.
Government Spending Adjustments
To remain within IMF programme limits, the Ministry of Finance will likely adjust government expenditures to keep the fiscal deficit and primary surplus targets on track.
Meanwhile, the State Bank of Pakistan continues to purchase dollars from the open market to strengthen foreign exchange reserves.
Analysts warn that the evolving Middle East crisis could create additional pressure on Pakistan’s external sector and energy import bill.
Under the new proposal, the FBR’s tax collection target is expected to be reduced to Rs13.45 trillion by June 2026, down from the previously revised target of Rs13.97 trillion.
Initially, the government had set a target of Rs14.13 trillion, but revenue shortfalls have forced authorities to reconsider the goal.
Officials from Pakistan and the IMF are currently holding virtual negotiations to finalise a staff-level agreement (SLA) under the $7 billion Extended Fund Facility (EFF) programme.
The discussions aim to align Pakistan’s macroeconomic and fiscal framework with the lender’s requirements.
Revenue Shortfall
The FBR has faced a revenue gap of about Rs428 billion during the first eight months of the fiscal year, making it difficult to achieve the original tax-to-GDP target.
Under the revised projections:
Tax-to-GDP ratio: expected to reach 10.6% by June 2026
Previous IMF target: 11%
Tax-to-GDP in 2025: about 10.3%
Pakistan’s economic indicators are being reassessed as part of the IMF review.
Key projections include:
GDP growth: around 4% for the current fiscal year
Inflation: expected between 7% and 7.5%
Current account deficit: projected within 0–1% of GDP
Officials say inflation may rise due to increasing global fuel prices and geopolitical tensions, particularly the ongoing conflict in the Middle East.
Government Spending Adjustments
To remain within IMF programme limits, the Ministry of Finance will likely adjust government expenditures to keep the fiscal deficit and primary surplus targets on track.
Meanwhile, the State Bank of Pakistan continues to purchase dollars from the open market to strengthen foreign exchange reserves.
Analysts warn that the evolving Middle East crisis could create additional pressure on Pakistan’s external sector and energy import bill.
