IMF 'urges' provinces to raise additional Rs400 billion in budget 2026-27

The International Monetary Fund (IMF) has asked Pakistan’s provinces to generate an additional Rs400 billion in revenue in the upcoming federal budget, ARY News reported on Tuesday, citing sources familiar with the discussions.

Sources said the Pakistan government has initiated consultations with provincial authorities regarding measures aimed at increasing provincial revenues during the next fiscal year.

Finance Minister Muhammad Aurangzeb held a virtual meeting with provincial finance ministers to discuss proposals linked to the IMF programme and strategies for enhancing provincial revenue collection.

During the meeting, discussions focused on increasing both tax and non-tax revenues at the provincial level. Sources said participants also exchanged views on raising income tax on agricultural earnings, property tax and excise duties.

Consultations were further held on provincial tax revenue targets and fiscal surplus goals for the next budget.

IMF ‘pushes’ Pakistan for Rs500bln in additional taxes ahead of budget 2026-27

Officials expect the provinces to contribute around 0.3 per cent towards improving the country’s tax-to-GDP ratio in the next financial year.

Sources added that provincial governments are also expected to broaden the scope of sales tax collection on services and bring more sectors of the provincial economy into the tax net.

According to officials, the revised agricultural income tax rates will apply to agricultural income generated during fiscal year 2026, while the financial impact of the measures is expected to materialise in fiscal year 2027.

Sources further stated that the IMF has not set any agricultural income tax target for the current fiscal year.

The IMF has also urged provincial governments to improve the efficiency of systems related to the collection of General Sales Tax (GST) on services, sources added.