IMF agrees to cut Pakistan’s tax target by Rs150 billion

ISLAMABAD: The International Monetary Fund (IMF) has agreed to reduce Pakistan’s tax collection target by Rs150 billion, ARY News reported on Thursday, citing official sources.

According to the sources, Pakistan successfully persuaded the IMF to lower the target in light of the economic losses caused by recent floods.

Under the revised agreement, the Federal Board of Revenue’s (FBR) tax collection target for FY2025–26 has been reduced from Rs14,131 billion to Rs13,981 billion.

The FBR is currently facing a shortfall of Rs199 billion during the first quarter of the ongoing fiscal year, sources said.

Earlier, Prime Minister Shehbaz Sharif had proposed a Rs250 billion reduction in the FBR’s tax collection target for the next fiscal year. However, the IMF agreed to a Rs150 billion cut instead.

Officials said the government’s main objective was to avoid introducing new taxes while ensuring realistic revenue goals amid challenging economic conditions.

The IMF, in its recent report, warned that the devastating monsoon floods have significantly impacted Pakistan’s economy — slowing growth, fueling inflation, and widening the current account deficit.

IMF shared its findings in its latest Regional Economic Outlook for the Middle East and Central Asia.

Pakistan’s GDP growth estimated to remain 3.6% in current financial year. This is below the target of 4.2% set by the government. Heavy flood damage to agriculture, roads, and homes has caused the damage, IMF said. “These losses will likely reduce income and drive-up prices”.

The IMF also warned that inflation could surge again in coming months owing to the end of electricity subsidies, tariff hikes, and supply issues caused by the flooding. Food and energy prices are expected to be hit the hardest, according to report.