Pakistan seeks Rs200 billion reduction in tax target from IMF

ISLAMABAD: Pakistan is seeking a reduction of Rs200 billion in its tax collection target from the International Monetary Fund (IMF), citing restricted economic activity triggered by global oil supply disruptions following the US-Israel attack on Iran.

Prime Minister Shehbaz Sharif announced a wide-ranging set of austerity measures across federal and provincial governments to address ongoing economic challenges and provide relief to the public. Under the new directives, all government departments will reduce petrol usage for official vehicles by 50 percent over the next two months, with ambulances and public transport buses exempted.

According to sources, the final round of virtual negotiations with the IMF is scheduled for today. On the Prime Minister’s instructions, the Ministry of Finance will push for maximum relief during the talks.

Officials said the government’s efforts will focus on reducing the tax collection target by Rs200 billion, as limited economic activity due to the Middle East crisis could negatively impact revenue.

The IMF has reportedly demanded late payment surcharges on Rs214 billion in super tax collected after the deadline. The FBR has also aimed to recover the maximum super tax by 30 June 2026.

The government is also seeking income tax relief for salaried taxpayers, with sources indicating strong prospects of approval from the IMF.

Earlier, Pakistan informed the IMF that it may miss its tax revenue target due to restricted economic activity.

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.