IMF may allow cut in FBR target belowRs12.5tr

ISLAMABAD: The International Monetary Fund (IMF) may lower its tax collection estimate for Pakistan to below Rs12.5 trillion on account of the revenue collection deficiency registered in the preceding months along with a subdued economic activity.

As the tax revenue target is Rs12.9 trillion, the aim would be achievable only if the Finance Ministry manages to increase expenditure cuts, which ensures the IMF’s primary budget surplus target of Rs1.2 trillion is met, as per official sources.

Key Discussions Between IMF & Pakistan

Pakistan’s energy ministry was also tasked with giving their circular debt forecasts for the 2025-26 fiscal year. The Division of Powers promised the IMF that the existing levels of circular debt would be capped at the previously agreed upon amount of Rs2.429 trillion.

The negotiations on the third consecutive day between the IMF and Pakistan concentrated on:

📌 Performance of energy sector

📌 Release of economic/social surveys

📌 Budget data & external funding gaps

Government sources said the tax officials suggested the target should be lowered by Rs579 billion to approximately Rs12.3 trillion. On the other hand, the IMF indicated a reduction of approximate Rs435 billion, which would bring the target just under Rs12.5 trillion, although this remains unconfirmed.

Challenges With Meeting Revenue Target And Possible Remedies

The Federal Board of Revenue (FBR) is still hopeful that their revenue projections for March will be met, but revenue for April and May is projected to fall short, with hopes of making up the difference in June.

In an effort to reduce the revenue deficit, the FBR is considering the following options:

✅ Reduce taxes on tobacco, beverages, and construction sectors to spark economic activity and generate Rs 90 billion.

✅ Collection of pending court case dues amounting to Rs 300 billion.

✅ Levy of tax enforcement measures which have already accounted for Rs 90 billion in the last eight months along with collection of fresh dues.

✅ Collection of advance income tax due under Section 147 of the Income Tax Ordinance would likely result in Rs 130 billion.

In spite of the increase of taxes capped at 1.3 trillion this year, the total revenue deficit stands at a whopping 606 billion for the period of July-February. The middle class, especially has experienced uncompensated heavy taxation and no result to show for it.

Cuts on Expenses And Difficulties Faced Publicly Financed

With no room to shift the finances, the Finance Ministry is looking for points where they can cut’s spending which, is most likely by trimming the Public Sector Development Program (PSDP) further.

🔹 Initial allocation for PSDP was targeted at: Rs 1.4 Trillion

🔹 Current Budget Allocation after Reduction: Rs 1.1 trillion

🔹 Further spending reductions: Development spending will most likely be further cut which will have an impact on infrastructure spending.

In addition, savings of about Rs50 billion from power sector subsidies are anticipated.

IMF Indicates Attention on Economic Statistical Reporting

In the course of talks with the the IMF, the Pakistan Bureau of Statistics (PBS) gave a detailed presentation on the steps taken towards the publication of important economic and social surveys which are known for evaluating the aspects of economy, employment and welfare as well as poverty.

The Household Integrated Economic Survey (HIES) 2024-25 is being conducted and aims to address the following issues: ✔ Literacy and children who are not attending school ✔ Infant deaths and health issues of women ✔ Earnings, savings and expenditure of the family ✔ Estimates of poverty based on consumption 📌 Labour Force Survey 2024-25… is also being done, but Pakistan has chosen to issue a yearly rather than quarterly report.

To improve the understanding of Pakistan’s economy, the IMF was updated that completion of these surveys will be available by December 2025.

Summary: Growth Repairs From A Fiscal Strategy Standpoint Brings Problems for Pakistan

In view of revenue underperformance along with a heightened fiscal stance, Pakistan faces the imposition of spending reductions whilst fulfilling IMF benchmarks. Achieving the revised tax expectations and containing the debt figures will further determine the Government’s capacity to guarantee sustain dominance of the economy Pakistan and facilitate IMF support in the future.