Pakistan meets three out of five IMF fiscal targets, misses tax base expansion goal

Pakistan has met three out of five major fiscal conditions set by the International Monetary Fund for the next $1 billion loan tranche, largely supported by elevated interest rates and strong petroleum levy collection, while efforts to broaden the tax base fell short during the first half of the current fiscal year, The Express Tribune reported. 

According to the Ministry of Finance’s fiscal operations summary for July–December, the government achieved targets related to the primary budget surplus, provincial cash surplus, and provincial tax revenue. However, it failed to meet benchmarks for overall tax collection and income tax receipts from the retail sector.

The Federal Board of Revenue remained the weakest area, missing its downward-revised collection target of Rs6.49 trillion by Rs330 billion. The tax authority also failed to generate the agreed Rs366 billion in income tax from the retail sector, even after the scope was expanded beyond individual retailers to include corporate entities classified under retail activity.

Revenue performance during the period relied heavily on profits transferred by the central bank and petroleum levy collection. The government booked an estimated Rs2.42 trillion in annual profits from the State Bank of Pakistan during the six-month period, helping inflate the primary surplus. Petroleum levy receipts reached Rs823 billion, collected across fuel consumption by both commercial and household users.

As a result, the federal government reported a primary surplus of Rs4.1 trillion against a target of Rs3.2 trillion, equivalent to 3.2% of GDP. The central bank has previously cautioned that sustaining the full-year primary surplus target could remain challenging.

Provincial governments exceeded agreed benchmarks, collectively generating a cash surplus of Rs1.18 trillion compared to a target of Rs752 billion. Provincial revenues reached Rs569 billion, surpassing the Rs488 billion target. Total provincial income stood at Rs4.7 trillion, with Rs3.6 trillion coming from the federal divisible pool under the NFC award.

Punjab recorded a surplus of Rs609 billion after revenues of Rs2.2 trillion and spending of Rs1.5 trillion, though accounts reflected a statistical discrepancy of Rs144 billion. Sindh posted a cash surplus of Rs353 billion, while Khyber Pakhtunkhwa generated Rs175 billion and Balochistan Rs42 billion, each also reporting statistical discrepancies.

Under the $7 billion IMF programme, Pakistan has committed to nearly 50 conditions, including a cumulative provincial cash surplus of Rs1.5 trillion for the full fiscal year. The finance ministry said conditions related to subsidies for the Benazir Income Support Programme and the power sector were also met.

On the expenditure side, federal spending totaled Rs7.1 trillion in the first half, with current expenditure at Rs6.8 trillion. Interest payments amounted to Rs3.6 trillion, lower year-on-year due to easing rates. Defence spending stood at Rs1.04 trillion, civil administration costs at Rs380 billion, and pension payments rose to Rs504 billion.

After accounting for provincial transfers and statistical discrepancies of Rs71 billion, the federal government’s net income for the first half was reported at Rs6.4 trillion, supported primarily by central bank profits and petroleum levy revenues.