ISLAMABAD: The International Monetary Fund (IMF) has called on Pakistan to increase its tax revenues by Rs430 billion, setting an ambitious tax collection target of Rs14.3 trillion for the upcoming 2025–26 federal budget.
This recommendation came during the second round of virtual negotiations between the IMF and Pakistani officials, where discussions focused on revenue generation and fiscal reforms.
The IMF stressed the urgent need to broaden the tax base, expedite the resolution of pending tax-related court cases, and strengthen enforcement measures. The Fund believes that a large portion of the additional revenue could come through improved enforcement, estimating that Rs600 billion could be recovered through these actions alone.
Finance Minister Muhammad Aurangzeb briefed the IMF team on Pakistan’s economic conditions and the ongoing challenges, including sluggish economic growth and high inflation, which have limited the government’s ability to meet revenue targets. Current estimates suggest tax collection may reach Rs13.275 trillion, short of the IMF’s proposed target.
Nonetheless, the government believes that through policy reforms and better enforcement, an additional Rs1.03 trillion in revenue could still be generated.
The IMF has also urged Pakistan to ramp up documentation efforts in high-potential, under-taxed sectors such as real estate, tobacco, and beverages, while emphasizing the need for better real-time data collection and automation at the Federal Board of Revenue (FBR).
Other topics discussed included enhancing production data monitoring and overall improvements in fiscal transparency and documentation practices.
This push from the IMF comes as part of its broader demands tied to unlocking a $1 billion loan tranche, with a nine-member IMF mission, led by Nathan Porter, currently in Pakistan to assess progress on economic reforms.
Earlier, the IMF specifically demanded that Pakistan crack down on tax evasion in the real estate sector, citing its significant revenue potential and historical underreporting.
