Paksitan falters to meet IMF conditions, provinces asked to raise PKR 400 billion in taxes

The move is expected to further burden citizens already grappling with soaring inflation and economic uncertainty, with the combined additional taxation target under federal and provincial budgets projected to exceed Rs 1.1 trillion for FY2026-27.

Pakistan Finance Minister Muhammad Aurangzeb held a virtual meeting with provincial finance ministers to discuss new revenue targets tied to IMF commitments, government officials said.

Under the proposed framework, the federal government is expected to generate nearly Rs700 billion through fresh tax measures, stricter enforcement actions and increased petroleum levy collections, while provinces have been tasked with mobilising more than Rs400 billion in additional revenues, The Express Tribune reported.

According to reports, Sindh has been assigned the highest target of around Rs200 billion, followed by Punjab with Rs175 billion, Khyber Pakhtunkhwa with Rs 45 billion and Balochistan with nearly Rs20 billion.

The latest measures come as Pakistan remains heavily dependent on IMF support to stabilise its fragile economy amid mounting fiscal pressures and persistent revenue shortfalls. The IMF has reportedly asked provinces to increase tax collection equivalent to 0.3 per cent of GDP, or roughly Rs 430 billion.

Pakistan's widening fiscal imbalance, with the government facing an estimated revenue shortfall of nearly Rs1 trillion due to weak performance by the Federal Board of Revenue (FBR). To bridge the gap, authorities are relying on aggressive tax collection drives, higher petroleum levies and cuts in development spending, The Express Tribune reported.

The IMF has also pushed Pakistan to improve tax collection from sectors considered undertaxed, particularly agriculture, real estate and services. According to the IMF assessment, agriculture contributes nearly 24.6 per cent to Pakistan's economy but faces an effective tax rate of just 0.3 per cent.

In contrast, petroleum products continue to face extremely high taxation, with the IMF reportedly estimating the effective tax rate on petroleum at 166 per cent. Pakistan is expected to collect Rs1.727 trillion through petroleum levies in the next fiscal year, nearly Rs260 billion higher than the current target.

The IMF further noted delays and enforcement failures in implementing agricultural income tax reforms despite repeated commitments by Pakistani authorities. Provinces have now been directed to expand the GST net on services, improve property tax collection and enhance enforcement mechanisms.

Pakistan has also assured the IMF that provincial governments would avoid introducing policies that could undermine commitments made under the lender's reform programme. (ANI)