Pakistan, IMF Agree to Lower Tax Collection Target by Rs. 620 Billion

Pakistan and the International Monetary Fund have agreed to revise the country’s macroeconomic and fiscal framework for the current fiscal year, reducing the Federal Board of Revenue’s annual tax collection target from Rs. 12.97 trillion to Rs. 12.35 trillion. The Rs. 620 billion reduction does not alter the previously agreed-upon tax-to-GDP ratio target of 10.6 percent, reported a national daily. The FBR has already experienced a revenue shortfall of Rs. 0.6 trillion during the first eight months of the fiscal year. The revised framework will adjust collection expectations downward for the remaining four months from March through June. As part of the agreement, the IMF has required the finance ministry to provide written assurance that government expenditures will be proportionally reduced to maintain the Rs2.4 trillion primary surplus target established for the current fiscal year. “There will be no mini-budget,” a top official confirmed. “We have successfully convinced the FBR to adjust our target in line with the downward revision in nominal growth figures. The size of the economy has been revised from Rs. 123 trillion to Rs. 116.5 trillion for the current fiscal year, so the 10.6 percent tax-to-GDP ratio now translates to an FBR collection target of Rs. 12.35 trillion.” The discussions are part of the first review under Pakistan’s $7 billion Extended Fund Facility. Policy-level talks are expected to conclude Friday, with both sides likely to develop the next budgetary framework through virtual discussions or possibly a small IMF mission visit in early May 2025 to finalize numbers for the 2025-26 budget. Officials described the agreement as a “major breakthrough,” noting that Pakistan and the IMF have also agreed to lower the nominal GDP growth rate target, including CPI-based inflation. The real GDP growth projection has been reduced from 3.6 percent to between 2 and 2.25 percent, while average inflation expectations have been cut from 12.5 percent to 7 percent for the current fiscal year. These adjustments have resulted in reducing the overall size of Pakistan’s economy from Rs. 123 trillion to Rs. 116.5 trillion.