IMF, Pakistan set key targets for budget 2025-26

ISLAMABAD: Pakistan’s federal budget 2025-26 is estimated to surpass PKR 17.6 trillion, with the Federal Board of Revenue (FBR) tasked with collecting PKR 14,307 billion in tax revenue, ARY News reported.

According to official documents, negotiations between Pakistan and the International Monetary Fund (IMF) have progressed, with key fiscal targets agreed upon.

The FBR’s revenue strategy includes PKR 6,470 billion from direct taxes, PKR 4,943 billion from sales tax, PKR 1,741 billion from customs duty, and PKR 1,153 billion from federal excise duty.

The petroleum levy is projected to yield PKR 1,311 billion, while non-tax revenue is set at PKR 2,584 billion, bolstered by a provincial surplus of PKR 1,220 billion. These measures aim to reduce the fiscal deficit to 5.9% of GDP, down from 7.4% in the current year.

Expenditure plans allocate PKR 8,685 billion for debt servicing, reflecting the heavy burden of interest payments, and PKR 2,414 billion for defense.

The federal government intends to spend PKR 1,065 billion on development projects under the Public Sector Development Programme (PSDP), with borrowing estimated at PKR 6,588 billion to address the fiscal shortfall.

Read More: IMF ‘demands’ Pakistan to phase out federal funding for provincial development projects

The budget reflects Pakistan’s commitment to IMF-driven reforms, including boosting the tax-to-GDP ratio from 9.5% to 10.4%, amid cautious optimism for economic stabilization.

Earlier, the International Monetary Fund (IMF) urged Pakistan to gradually phase out federal funding for provincial development projects under the Public Sector Development Programme (PSDP).

According to sources, the IMF made this demand during virtual discussions with provincial governments, focusing on expenditure plans for the 2025-26 fiscal budget, with provinces actively participating in these sessions.

The IMF proposed that provinces eliminate their dependence on federal funds by independently raising resources, including enforcing an income tax on agricultural earnings exceeding PKR 600,000 annually starting July 1, 2025, without exemptions.