Pakistan likely to introduce mini-budget to bridge financing gap

Pakistan is expected to introduce a mini-budget ahead of the next federal budget, with several new taxes likely to be imposed on different categories of goods, ARY News reported on Friday.

According to the report, Pakistan is prepared to implement additional taxation measures and cut expenditures to meet revenue targets and financing gap.

The plan includes a 5% increase in excise duty on fertilisers and pesticides, as well as the introduction of taxes on high-value sugar products.

Pakistan has assured the IMF that it will impose 18% sales tax on several specified items as part of additional revenue measures. The IMF report further states that Pakistan intends to reduce government spending to compensate for the shortfall, while the Federal Board of Revenue (FBR) is likely to miss its tax collection target.

The IMF noted that Pakistan aims to increase its tax-to-GDP ratio to 15%. The country must also bridge a financing gap of USD 4 billion during the current fiscal year. Pakistan is expected to receive USD 2 billion in instalments under the existing IMF programme, while another USD 1 billion may be received under the Saudi oil facility.

According to the report, Pakistan may obtain USD 504 million in budget support from the Asian Development Bank, USD 500 million from the World Bank Group, and USD 250 million through the issuance of an international bond.

To address the revenue gap, Pakistan has committed to taxing fertilisers, pesticides and surgical items. New tax measures and several additional conditions have been included in the Memorandum of Economic and Financial Policies (MEFP) for the next IMF tranche.

The report confirms that a 5% Federal Excise Duty will be imposed on fertilisers and agricultural pesticides due to the revenue shortfall. The IMF has also set an August 2026 deadline for changes to the State-Owned Enterprises (SOE) law.

The FBR has assured that further taxes will be imposed if revenue fails to meet expectations.

The IMF report states that the government has committed to fully deregulating the sugar sector. The Fund will continue working with Pakistan to support stable economic growth, including reforms in the energy sector, tariff adjustments and cost-reducing measures.

Over the next two years, point-of-sale (POS) systems will be installed in all 40,000 major retailers nationwide.

A total of 5.2 million tax returns were filed in FY2024, and 7 million in FY2025. The MEFP also includes a commitment to harmonise sales tax across all four provinces.

Only 10% of the Public Sector Development Programme (PSDP) will be allocated to new projects, while around Rs2.5 trillion worth of ongoing projects will be prioritised.

The report adds that greater focus will be placed on climate-related projects in the next fiscal year. Public procurement transparency will be enhanced through the use of e-PADS, with the Auditor General set to present a report to the President by March 2026.

From January 2026, quarterly payments under the Kafalat Programme will be increased to Rs14,500, while the beneficiary base will expand to 10.2 million people. Biometric verification and an e-wallet system will be introduced for BISP payments by June.