Pakistan Faces Rs. 560 Billion Tax Shortfall, FBR Warns PM

Pakistan’s tax authorities have warned Prime Minister Shehbaz Sharif that the country may miss its downward-revised half-year revenue target by Rs. 560 billion unless the Attorney General’s office expedites court recoveries, highlighting mounting fiscal pressures as Islamabad seeks to maintain compliance with International Monetary Fund (IMF) requirements. The warning came during a high-level meeting on fiscal affairs, a day after IMF Resident Representative Mahir Binici met with the prime minister to deliver a message from the Fund’s executive board. While official details of the meeting were not disclosed, sources said the IMF reiterated the need for Pakistan to stay on track with its reform commitments. The Federal Board of Revenue (FBR) told the prime minister that, without swift court decisions, the tax shortfall could reach Rs. 562 billion against the revised target of Rs. 6.49 trillion for July-December, and would exceed Rs. 775 billion compared to the original Rs. 6.7 trillion goal. The FBR has already recorded a Rs. 413 billion shortfall in the first five months of the fiscal year. Officials said that if Rs. 200 billion in recoveries from pending court cases materialize this month, the gap could be reduced to Rs. 362 billion. The finance ministry cautioned that a significant revenue shortfall would force spending cuts, as the IMF would not permit deviation from the agreed primary surplus target. The IMF approved a $1.2 billion loan package for Pakistan this week only after authorities pledged to introduce a mini-budget if revenue targets are missed. Participants in the meeting also discussed the impact of interest rates and exchange rate policy on economic growth and revenue collection. Some argued that a weaker rupee could boost exports and tax receipts, while others noted that high interest rates have benefited the finance ministry through increased central bank income. The IMF has pressed Pakistan to adopt a genuinely flexible exchange rate to restore competitiveness. The FBR’s performance came under scrutiny, with participants criticizing the agency for shifting responsibility to other government departments and questioning its ability to meet the ambitious Rs. 14.13 trillion annual target. The FBR chairman’s recent move to provide 1,000 cars to officers and authorize up to a fourfold salary increase was highlighted as an attempt to improve performance. Prime Minister Sharif directed the FBR to intensify efforts to achieve an 11% tax-to-GDP ratio and praised the Customs Department for reducing clearance times through technology and artificial intelligence. He also instructed the FBR to ensure tax enforcement across all sectors and commended recent actions against illegal cigarette factories, which resulted in the seizure of a large cache of illicit cigarettes. The meeting concluded with a directive for provincial governments to fully cooperate with the FBR in tackling tax evasion and illegal manufacturing, and to ensure the timely payment of sales tax refunds. However, the FBR’s request for additional funds to clear refunds owed to oil marketing companies was rejected by the finance ministry.