ISLAMABAD: The World Bank (WB) is expected to approve an additional $70 million in International Development Association (IDA) credit for Pakistan Raises Revenue (PRR) to support the Federal Board of Revenue (FBR) in implementing its new Transformation Plan.
The additional financing will increase the total PRR project funding to $470 million and extend its duration by two years, until June 30, 2027. The funding aims to strengthen FBR’s tax administration, digital transformation, enforcement mechanisms, and anti-smuggling measures as part of a broader economic reform agenda aligned with Pakistan’s new IMF Extended Fund Facility (EFF) program.
The PRR project, originally allocated $400 million, consists of a results-based component ($320 million) and an investment financing component ($80 million). The additional financing will scale up the investment financing component, enabling FBR to enhance ICT systems, upgrade customs infrastructure, and modernize enforcement mechanisms.
According to official documents, Pakistan’s weak tax-to-GDP ratio (10.5% in FY24) has resulted in fiscal deficits, debt accumulation, and macroeconomic instability. Exemptions alone accounted for 4% of GDP in FY24, while low compliance and enforcement capacity have led to a narrow tax base, with only 13.4 million registered income taxpayers and 396,000 sales taxpayers.
The Transformation Plan, which includes digitization, institutional strengthening, and human resource reforms, is part of Pakistan’s long-term strategy to raise FBR collections to 10% of GDP by FY27 and achieve a 15% tax-to-GDP ratio by 2035. The plan also aligns with World Bank Group (WBG) Scorecard indicators on debt sustainability, private investment, and service accessibility.
In addition to World Bank funding, Pakistan has sought support from other development partners, including the Asian Development Bank (ADB), which is expected to approve a dedicated new project in mid-FY26 to further bolster tax reforms. The $200 million Transformation Plan will be implemented through a combination of development partner funding and new budgetary allocations.
The Economic Coordination Committee (ECC) has already reviewed the proposal, and the World Bank’s approval of the $70 million additional financing is expected soon, allowing for rapid implementation of FBR’s modernization initiatives.
