Islamabad, March 1: Pakistan's tax shortfall has ballooned to Rs 606 billion in the first eight months of the current fiscal year, intensifying pressure on authorities already struggling to fulfill stringent commitments made to the International Monetary Fund (IMF), according to a media report.
Despite receiving a crucial USD 7 billion loan from the IMF, Pakistan remains significantly behind the fund's tough tax-collection targets. The IMF's loan conditions notably include stringent revenue benchmarks, aiming for robust fiscal discipline.
Federal Board of Revenue Misses Targets Again
The Federal Board of Revenue (FBR) provisionally collected Rs 7.342 trillion from July to February, falling significantly short of the targeted Rs 7.95 trillion by Rs 606 billion, as reported by The Express Tribune. Although this represents an impressive year-on-year growth rate of approximately 28%, the revenue inflow is insufficient to meet the IMF-imposed goals.In February alone, the FBR missed its monthly target of Rs 983 billion by Rs 138 billion, collecting just Rs 845 billion. This marks the seventh consecutive month that tax collection has fallen below IMF expectations.
Despite these shortfalls, the FBR's collection increased by Rs 1.65 trillion compared to the previous fiscal year—a significant accomplishment considering the economy grew less than 1% during the first quarter.
Burden of New Taxes Under IMF Pressure
Facing pressure from IMF conditions, the Pakistani government implemented new taxes heavily impacting the salaried class. Taxes have been extended to a wide array of everyday goods and services, including medical tests, stationery, vegetables, and children's milk, putting significant financial strain on citizens.During the July-February period, the FBR failed to achieve targets for sales tax, federal excise duty, and customs duty. However, income tax collections surpassed their target, providing a rare bright spot amidst broader revenue challenges.
World Bank Sees Economic Stabilisation in Pakistan
Meanwhile, in a separate development, the World Bank acknowledged signs of economic stabilisation taking hold in Pakistan. Recognizing this as an opportune moment, the World Bank and the government of Pakistan have announced plans to sign a landmark 10-year development agreement under the newly established Country Partnership Framework.Najy Benhassine, the World Bank’s Country Director for Pakistan, highlighted this milestone in a video message shared on social media platform X, stating:
Under this framework, the World Bank plans to allocate approximately USD 20 billion in development lending starting in 2026. The funding will primarily target critical sectors such as clean energy, climate resilience, education quality, child nutrition, inclusive development, and private-sector investment.
Inflation Stabilizes, Remittances Surge
According to the latest monthly outlook report by Pakistan’s finance ministry, inflation appears to be stabilizing. In January, the Consumer Price Index (CPI) was recorded at 2.4%, significantly down from 24% in the same period last year. Authorities credit this improvement to ongoing economic stabilisation efforts under the IMF programme secured last summer.Additionally, foreign remittances, a key lifeline for Pakistan's economy, experienced a robust increase. Workers' remittances from July to January reached USD 20.8 billion, marking a 31.7% surge compared to USD 15.8 billion last fiscal year.
Upcoming IMF Review Critical for Pakistan
An IMF delegation is scheduled to arrive in Islamabad next week to undertake the first official review of Pakistan’s ongoing USD 7 billion loan facility. Authorities anticipate further improvement in the primary surplus—a critical IMF benchmark—in the coming months.Pakistan's ability to meet these IMF benchmarks will be essential for economic stability and continued international financial support.
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