The government is weighing additional fiscal measures, including spending cuts and increased revenue enforcement, to address a Rs600 billion budget shortfall before securing the next $1.1 billion disbursement from the International Monetary Fund (IMF).
As per a news report, the government officials indicate that these measures, expected to take effect from April 1, could involve stricter controls on Public Sector Development Programme (PSDP) spending, targeted revenue collection from under-taxed sectors like retail and real estate, and activating contingency mechanisms agreed under the $7 billion Extended Fund Facility (EFF).
The IMF review mission, currently in Islamabad, is assessing Pakistan’s economic performance from July to December 2024 to determine eligibility for the second loan tranche. Discussions between IMF staff and Pakistani authorities, set to conclude by March 14, will finalise how much each fiscal adjustment contributes to closing the gap. Officials caution that without intervention, the fiscal shortfall could exceed Rs1 trillion by the end of the financial year.
The Federal Board of Revenue (FBR) has committed to generating Rs250 billion in additional revenue through expanding the tax net for retailers and real estate.
Meanwhile, contingency tax measures already approved under the IMF programme may be triggered if revenue collection falls below targets. These include increased advance income tax on industrial and commercial imports, a 1% rise in withholding tax on supplies and services, and a 5% hike in Federal Excise Duty on sugary and aerated drinks.
Finance Minister Muhammad Aurangzeb has expressed confidence in Pakistan’s position for the IMF review, stating that ongoing reforms and corrective measures will help meet fiscal targets. The government is also under pressure to implement broader structural reforms, including tax system improvements, energy sector restructuring, and privatization of state-owned enterprises.
The IMF has reiterated that its programme aims to increase Pakistan’s tax-to-GDP ratio by 3% while improving tax compliance and broadening the tax base.
It has stressed the importance of bringing retailers, property owners, and agricultural income into the tax net, rationalizing personal and corporate tax rates, and removing tariff exemptions to enhance revenue collection.
