Pakistan informs IMF of possible tax shortfall amid Middle East tensions

ISLAMABAD: Pakistan has informed the International Monetary Fund (IMF) that it may miss its tax revenue target due to restricted economic activity triggered by global oil supply disruptions sparked by US-Israel attack on Iran.

According to sources, Pakistani authorities briefed the IMF during virtual talks, including a special economic session focused on the impact of the regional crisis on the country’s economy.

Officials told the IMF that measures taken to limit economic activity in response to the crisis could make it difficult for the government to achieve its tax collection target.

Despite the pressure, the government remains committed to maintaining economic stability and moving closer to its growth targets, the sources added.

Pakistan also informed the IMF that the country’s economic growth rate is now expected to remain around 4 percent, slightly below the earlier projection of 4.2 percent.

Officials further warned that inflation may exceed the target, with prices likely to rise to around 7.8 percent, compared with the previously projected 7.5 percent, largely due to the impact of Middle East tensions on global energy markets.

However, Pakistan expressed confidence that it will still be able to achieve its remittance inflow target from overseas Pakistanis, despite the ongoing regional uncertainty.

Earlier, Prime Minister of Pakistan Shehbaz Sharif announced a wide-ranging set of austerity measures across federal and provincial governments to address the ongoing economic challenges and ensure relief for the public.

Under the new directives, all government departments will face a 50 percent reduction in petrol usage for official vehicles for the next two months, though ambulances and public transport buses will remain exempt. In addition, 60 percent of departmental vehicles will be taken off the road, and purchases of vehicles, furniture, air conditioners, and other non-essential items have been suspended.

The prime minister also announced salary reductions and suspensions. Cabinet members, ministers, advisers, and special assistants will forego salaries for the next two months, while members of Parliament will face a 25 percent pay cut.

Senior officers in Grade 20 and above, with salaries exceeding Rs300,000, will see two days’ pay deducted, which will be directed toward public relief efforts. Government departments have also been instructed to reduce all non-salary expenses by 20 percent.