The International Monetary Fund (IMF) has called on Pakistan to introduce a mini-budget to address a revenue shortfall, sources reported on Saturday, following last month’s deadline for filing income tax returns.
In September, the IMF’s Executive Board approved a new $7 billion, 37-month loan program for Pakistan, which stipulates “sound policies and reforms” to enhance macroeconomic stability. This approval unlocked an immediate $1 billion disbursement to Islamabad.
The economically strained South Asian nation has turned to the IMF for support 22 times since 1958.
The IMF’s recommendation aims to help Pakistan meet its tax collection targets. Based on IMF guidance, Pakistan may need to introduce two to three mini-budgets during this fiscal year. Revenue shortfalls were a key focus during recent virtual discussions.
A reported Rs190 billion deficit has further complicated Pakistan’s ability to comply with IMF requirements.
Sources noted that Pakistani taxpayers could face higher taxes on customs duties, sales tax, income tax, and other levies. The mini-budget is expected to improve tax administration.
The Federal Board of Revenue (FBR) plans to use the mini-budget to boost tax revenue in the first quarter of the fiscal year, with estimates suggesting the mini-budget could reach Rs500 billion by year-end.
Current projections indicate that an additional Rs60 billion may be needed to meet targets. This process could potentially recur in future quarters, underscoring the financial strain on the government.
Pakistan’s Rs13 trillion tax target initially assumed a 17% rise in imports, but actual import growth was just 8% in the first quarter due to weaker demand. Large-scale manufacturing growth has also lagged at 1.3%, below the 3.5% projection.
The FBR recorded a tax shortfall of Rs90 billion in the first quarter, and internal estimates suggest this could rise to between Rs350 billion and Rs400 billion by December.
Amid these shortfalls, the government faces a critical choice: either adjust its fiscal assumptions or continue aiming for targets that may prove unachievable.
On Friday, the finance ministry dismissed the prospect of adjusting the budget mid-year. In a statement, the ministry asserted that economic indicators, such as inflation, large-scale manufacturing growth, and import trends, are “aligned” with government projections. “There is no basis for budget adjustments at this point,” the spokesperson stated.
