Pakistan negotiating with IMF to cut property taxes ahead of FY27 budget: report

• Debate over property taxes intensified amid recent Gulf conflict and expectations of overseas Pakistanis shifting funds and investments into Pakistan’s real estate sector

The Federal Board of Revenue (FBR) informed the National Assembly Standing Committee on Finance on Monday that it was engaged in negotiations with the International Monetary Fund to reduce tax rates on the sale and purchase of properties in the upcoming FY2026-27 budget.

The meeting of the National Assembly Standing Committee on Finance and Revenue was chaired by Syed Naveed Qamar at Parliament House.

During the meeting, discussions focused on the macroeconomic outlook, fiscal priorities, IMF programme performance and structural reform challenges ahead of the FY2026-27 budget.

According to a news report, FBR officials told the committee that discussions were continuing over reducing taxes under Sections 236C and 236K of the Income Tax Ordinance.

Officials also informed lawmakers that preparation of the budget had been shifted to the Tax Policy Unit under the Ministry of Finance.

The debate on property taxes intensified in the context of the recent Gulf conflict and the possibility of overseas Pakistanis shifting funds and investments into Pakistan’s real estate market.

FBR officials also noted that property valuation rates in different cities had already been reduced.

Economy remains on ‘fragile stabilisation path’

The committee was informed that despite signs of gradual economic recovery, Pakistan remained on a “fragile stabilisation path” with multiple risks threatening the economy.

According to the briefing, GDP growth for FY2026-27 is projected between 3.5% and 4.5%, while inflation returned to double digits at 10.9% year-on-year in April 2026.

Independent economist Ali Salman from PRIME Institute told the committee that circular debt in the power and gas sectors had climbed to ₨5.1 trillion, including ₨3.3 trillion in the gas sector and ₨1.8 trillion in the power sector.

The committee was informed that Pakistan’s gross public debt had reached ₨83.28 trillion, while external debt stood at $137.56 billion.

Officials further said Pakistan’s foreign exchange reserves currently stood at $22.58 billion, providing around 2.58 months of import cover.

The State Bank of Pakistan policy rate currently stands at 11.5% following cumulative cuts of 1,200 basis points since June 2024.

The committee was told that FBR tax collection in the third quarter reached ₨9.304 trillion, reflecting a shortfall of ₨611 billion against targets.

Pakistan’s trade deficit widened to $32.19 billion during July-April FY2025-26 due to weak exports and rising imports, while remittance inflows remained strong at $33.86 billion during July 2025-April 2026. Remittances for FY2026 are projected at $41.2 billion.

Concerns over taxation and reforms

The committee expressed concern over rising inflation, unemployment, poverty, increasing debt and continued dependence on indirect taxation and petroleum levies instead of broadening the tax base.

Syed Naveed Qamar said reliance on indirect taxes and petroleum levies instead of sustainable tax reforms remained a serious concern.

He also criticised the slow pace of reforms in state-owned enterprises and highlighted rising socioeconomic pressures caused by inflation and unemployment.

The chairman further noted delays in circulation of the Budget Strategy Paper and said the Ministry of Finance was legally required under the Public Finance Management Act, 2019 to circulate the document in time for parliamentary scrutiny before the budget session.

Qamar observed that the FBR had repeatedly failed to meet collection targets despite imposing additional taxes on existing taxpayers.

He stressed the need for sustainable and equitable reforms to expand the tax base instead of placing further burden on documented sectors of the economy.

Committee members also observed that provincial fiscal surpluses were disproportionately supporting federal IMF compliance targets, while development expenditure remained compressed due to current spending and debt servicing requirements.

Lawmakers said Pakistan’s export sector continued to underperform compared to regional economies.

Energy, telecom and regional risks

The committee was informed that Pakistan sources nearly 90% of its energy imports from the Middle East, making the economy vulnerable to geopolitical tensions and oil price shocks.

Officials warned that any prolonged regional conflict could increase inflation, widen the current account deficit and place renewed pressure on the exchange rate.

The committee also expressed concern over high taxation on telecom and digital connectivity services, saying it was limiting digital inclusion, freelancing opportunities and economic participation, particularly among youth and low-income groups.

Members called for stronger action against illicit trade, counterfeit markets and undocumented economic activity, while stressing the need for increased investment in renewable energy, climate resilience and energy efficiency.

The committee said the FY2026-27 budget should move beyond short-term stabilisation measures and instead focus on sustainable reforms, fiscal transparency, governance improvements and inclusive growth.

The committee also approved the minutes of its previous meeting held on May 14, 2026.