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IMF imposes stringent conditions on Pakistan’s loan, including increased taxes and higher tariffs

The International Monetary Fund (IMF) has announced stringent conditions for its new $7 billion bailout package for Pakistan, focusing on measures to boost tax revenues and adjust tariffs.

Key initiatives include an increase in the Goods and Services Tax (GST) by 5%, the introduction of agricultural income tax this year, and new taxes on services and property next year. The government aims to raise its tax target to over Rs15 trillion for the upcoming financial year.

All major professions—such as engineering, medicine, law, export, construction, and development—will be included under these tax reforms. The IMF has also mandated a National Fiscal Agreement, requiring federal and provincial governments to work together to increase tax revenues and share expenditure responsibilities. The government has committed to taxing all income sources.

This year’s tax collection is projected to reach Rs1.723 trillion, with an increase to Rs2.157 trillion anticipated for next year. Plans are in place to eliminate all tax exemptions and impose a uniform 10% tax on goods, in addition to the increased GST.

To address tax evasion, especially in retail, transport, and real estate, the government will require all businesses to register, enhancing economic documentation. Furthermore, a 5% GST will be implemented on fertilizers and pesticides next year.

The IMF’s conditions also specify that the full cost of imported liquefied natural gas (LNG) will be passed on to consumers, with a gas tariff increase expected in February 2025. Major cities like Islamabad, Karachi, and Lahore will leverage third-party data for more precise tax assessments.

Additionally, a business-friendly scheme will be expanded to 36 more cities, along with plans for digital invoicing and a track-and-trace system to combat trafficking.

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