New Delhi, April 8 – The shortfall in the Pakistani government's revenues has emerged as a major weakness in the IMF program.
These revenues are the cornerstone of Pakistan's IMF loan agreements, focusing on aggressive tax expansion to meet revenue targets and secure funds. To align with the IMF's $7 billion Extended Fund Facility (EFF), the FBR is pushing for a revised target of over 13 trillion rupees, including significant tax increases, revenue reforms in agriculture, property, and increased monitoring for compliance.
However, the tax collection of the Federal Board of Revenue (FBR) in the first three quarters of the 2025-26 fiscal year has fallen significantly short of the target. The target was 9.917 trillion rupees, whereas the actual collection has been 9.307 trillion rupees. This represents a shortfall of 610 billion rupees, equivalent to 4.4 per cent of the revised downward annual target of 13.979 trillion rupees. The original target for FBR revenues in 2025-26 was 14.131 trillion rupees, according to an article in Pakistan's Business Recorder newspaper.
The required growth rate of revenues in 2025-26 to meet the lower revised target is still high at 19 per cent.
The target for income tax collections in 2025-26 is 6.967 trillion rupees, with a required growth rate of 20.3 per cent. The actual collection in the first three quarters of 2025-26 is 4.636 trillion rupees, representing a shortfall of 235 billion rupees. The achieved growth rate is only 12 per cent, the article stated.
Sales tax revenues are targeted at 4.580 trillion rupees in 2025-26, with a growth rate of 17.4 per cent. During the first three quarters, the tax collection has been 3.104 trillion rupees, with a growth rate of 9 per cent. Consequently, the shortfall is already 313 billion rupees, the article noted.
The two smaller indirect tax revenues, customs duty and excise duty, have not shown much divergence from their targets. The shortfall in the first three quarters is only 30 billion rupees in the case of customs duty. Revenue from excise duty has exceeded the nine-month target by 5 billion rupees. Both taxes have shown relatively high growth rates, above 12 per cent.
There is also a major deviation in the projection of one key determinant of the size of the tax base: customs duty and sales tax on imports. The IMF projection for 2025-26 is that the value of the rupee will fall by over 12 per cent by the end of June 2026. However, in the first nine months, there has been no decline.
There is also a need to assess the likely outcome in the fourth quarter of 2025-26 of FBR revenues. The start of the Middle East war prior to the start of this quarter has resulted in a significant increase in uncertainty about the global and national economies.
There could be shortages of imports if the closure of the Strait of Hormuz continues. However, import prices are significantly higher for oil and other imports. As such, it is not clear what the level of revenues from sales tax on imports and customs duty will be in the fourth quarter of 2025-26, the article added.