Centre, Punjab at odds over failure to meet three key IMF targets

Prime Minister Shehbaz Sharif has called for an explanation from the Ministry of Finance and the Federal Board of Revenue (FBR) regarding the failure to meet three key International Monetary Fund (IMF) conditions, amid Punjab’s claims that weak revenue projections and withheld taxes were the main reasons behind the province’s breach of its cash surplus target, The Express Tribune reported, citing sources.  

Pakistan fell short in meeting the Rs12.3 trillion tax collection target, failed to collect Rs50 billion from traders, and missed the target of generating over Rs1.2 trillion in cash surpluses by the provinces.

The Ministry of Finance’s fiscal operations summary released this week shows that the provinces fell significantly short of the Rs1.2 trillion cash surplus target for the last fiscal year. 

The provincial governments had agreed with the IMF and the federal government to generate Rs1.2 trillion in surpluses, contingent on the FBR meeting its tax target. However, the four provinces collectively generated a cash surplus of Rs921 billion, falling Rs296 billion short of the IMF target.

As per the news report, the federal government believes Punjab’s failure to meet the surplus target was due to overspending on development. Sources argue that the cash surplus issue in Punjab stemmed from this overspending.

Punjab’s response, however, shifted the blame to the Centre, stating that the province’s cash surplus targets could not be met due to the Finance Division not transferring the due share of taxes under the National Finance Commission (NFC) and the FBR’s failure to meet its targets.

Finance Ministry officials acknowledged that other provinces received less money compared to their projections but still performed better. Notably, Balochistan exceeded the IMF target.

Punjab’s Information Minister Azma Bukhari clarified that the Finance Division withheld Rs190.8 billion of Punjab’s federal divisible pool share in June, further impacting the province’s surplus. She stated that had the amount been released on time, Punjab’s surplus would have been Rs539.2 billion, well above the target of Rs630 billion.

Punjab government documents also reveal that the FBR missed its revised tax target of Rs12.3 trillion, only managing Rs11.74 trillion, a shortfall of Rs1.23 trillion. Punjab claims that had FBR met its full target, the province’s surplus would have been significantly higher.

In mid-June, Punjab received a revised estimate for its share, calculated against a projected FBR collection of Rs11.9 trillion. However, the actual collection still fell short. Punjab argues that the sudden downward adjustments in the FBR’s target were unreasonable and prevented the province from meeting its budgetary surplus targets.

The provincial government emphasized that its surplus target was directly linked to the FBR’s performance and urged the federal government to recognize the impact of weak revenue forecasting on the provinces’ ability to meet fiscal targets.