IMF urges Pakistan to address FBR revenue shortfall with new measures

IMF declined Pakistan’s request to lower the FBR’s tax collection targets.

The International Monetary Fund (IMF) has called on Pakistan to implement additional revenue measures to address the Federal Board of Revenue’s (FBR) tax collection shortfall during the first four months of the fiscal year.

According to sources from the FBR, the IMF declined Pakistan’s request to lower the FBR’s tax collection targets. The IMF urged the government to bridge the revenue gap with supplementary revenue-generation strategies.

In recent virtual meetings with the IMF, FBR officials sought a downward adjustment of tax targets due to current collection challenges, but the IMF refused this request. Sources also warned that the tax shortfall could affect the release of the next loan tranche, adding that further revenue actions might be necessary if the shortfall continues in the coming months.

On Thursday, the Ministry of Finance released a fiscal operations summary for the July-September period, revealing that Pakistan achieved two key IMF targets: a primary budget surplus and a net revenue collection by the provinces.

The federal government successfully met the major IMF condition of generating a primary surplus of Rs198 billion, which actually surpassed Rs3 trillion or about 2.4% of the GDP. This surplus was largely attributed to fully accounting for the annual profit of the central bank in the first quarter.

The central bank’s estimated annual profit of Rs2.5 trillion was fully booked in the initial quarter, balancing the figures that will level out in subsequent months.

However, the report highlighted Punjab’s financial struggle, with a budget deficit of Rs160 billion within the first three months. Other provinces, by contrast, posted cash surpluses.

Three additional targets were missed by notable margins, including the goal of a Rs342 billion provincial cash surplus, collecting Rs10 billion from traders, and achieving a Rs2.652 trillion tax collection target.

The Finance Ministry’s report showed that the cumulative provincial cash surplus target was missed by Rs182 billion, or 53%, due to Punjab’s expansionary fiscal policies. This shortfall underscores the challenges facing Pakistan in meeting the requirements of the $7 billion IMF program.

 

Monitoring Desk
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