Pakistan has presented a wide-ranging fiscal plan to the International Monetary Fund (IMF), committing to additional tax measures and spending cuts if revenue collection falls short by the end of the current month, according to the latest IMF country report.
Officials have drawn up a package of additional taxes to plug an expected shortfall in Federal Board of Revenue (FBR) collections. The proposed measures include a 5 per cent increase in federal excise duty on fertilizers and pesticides, as well as the introduction of a tax on high-value sugar products. The government has also assured the IMF that it will apply an 18 per cent sales tax to selected goods currently benefiting from exemptions.
The IMF report notes that Pakistan may need to impose a standard sales tax rate on high-value surgical items by abolishing their Schedule-8 exemption. New conditions tied to the Memorandum of Economic and Financial Policies (MEFP) for the next loan tranche also require fresh revenue-raising steps, including commitments to fully deregulate the sugar sector.
The IMF warns that FBR tax collection is likely to decline and stresses the government’s obligation to respond with stronger tax enforcement and possible expenditure reductions. Pakistan has pledged to increase its tax-to-GDP ratio to 15 per cent, and the Fund has set August 2026 as the deadline for key reforms to state-owned enterprise laws.
Pakistan faces a $4 billion financing gap in the current fiscal year. The IMF expects the country to receive $2 billion in program installments, alongside additional support that may include:
- $1 billion under the Saudi Oil Facility
- $504 million in budget support from the Asian Development Bank
- $500 million from the World Bank Group
- $250 million from international bond issuance
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