Pakistan Govt fails to meet IMF's revenue collection target

New Delhi, April 8 The shortfall in the Pakistan government’s revenues has emerged as the Achilles' heel of the IMF Programme.

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 Rs 13 trillion, including tough tax hikes, revenue reforms in agriculture, property, and increased surveillance for compliance.

However, the tax collection of the Federal Board of Revenue (FBR) in the first three quarters of 2025-26 has fallen significantly short of the target. The target was Rs 9,917 billion, whereas the actual collection has been Rs 9,307 billion. This implies a shortfall already of Rs 610 billion, equivalent to 4.4 per cent of the revised downwards annual target of Rs 13,979 billion. The original target for 2025-26 of FBR revenues was Rs 14,131 billion, 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 Rs 6,967 billion, with a required growth rate of 20.3 per cent. The level of revenues in the first three quarters of 2025-26 is Rs 4,636 billion, with a shortfall of Rs 235 billion. The growth rate achieved is only 12 per cent, the article stated.

Sales tax revenues are targeted at Rs 4,580 billion in 2025-26, with a growth rate of 17.4 per cent. During the first three quarters, the tax collection has been Rs 3,104 billion, with a growth rate of 9 per cent. Consequently, the shortfall already is of Rs 313 billion, the article noted.

The two smaller indirect tax revenues, the customs duty and the excise duty, have not shown much divergence from their targets. The shortfall in the first three quarters is only Rs 30 billion in the case of customs duty. Revenues from the excise duty have exceeded the nine-month target by Rs 5 billion. Both taxes have shown relatively high growth rates in revenues of above 12 per cent.

There is also a major deviation in the projection of one key determinant of the size of the tax base of the customs duty and the 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 commencement of the Middle East war prior to the start of this quarter has resulted in a big rise in the level of uncertainty about the global and national economies.

There could be shortages of imports if the stoppage of traffic continues in the Strait of Hormuz. However, import prices are significantly higher for oil and other imports. As such, it is not clear what the level of revenues from the sales tax on imports and customs duty will be in the fourth quarter of 2025-26, the article added.

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