ISLAMABAD: The International Monetary Fund (IMF) has not yet decided on Pakistan’s request for relief measures in the upcoming federal budget, scheduled for June 2, as discussions continue on key fiscal reforms and revenue targets.
According to sources, the IMF is urging tangible progress on agricultural income taxation and retail sector reforms before considering any concessions. In response, Pakistani authorities have pledged to offset any revenue shortfalls through cuts to the Public Sector Development Programme (PSDP).
The government is also preparing to implement new petroleum levies and introduce a carbon tax on petroleum and energy products, as part of the broader revenue strategy.
Officials from the Ministry of Finance and Federal Board of Revenue (FBR) have been in talks with the IMF mission since May 14, under the direction of Prime Minister Shehbaz Sharif. Among the proposed relief measures is a 2.5% average reduction in income tax across all salaried slabs. However, this depends on the IMF’s satisfaction with a revenue plan that supports the primary budget surplus target of 1.6% of GDP (about Rs2.1 trillion).
Budget Talks Ongoing, No Decisions Finalized
An official involved in the discussions said that no final decisions have been made, and responses to IMF queries are still being compiled. The Fund is currently reviewing fiscal projections and data submitted by the government using its internal evaluation systems.
Contrary to some media reports, the IMF has neither approved nor rejected the proposed relief measures. Talks concerning the real estate sector’s tax regime have also yet to formally begin.
Retail Tax Plan Under Review, Legal Recovery in Focus
The government’s current “Tajir Dost” scheme aimed at taxing retailers has underperformed and may soon be replaced by a more effective system. Meanwhile, the IMF has emphasized the importance of cutting provincial expenditures and increasing provincial revenues, particularly through agriculture income tax enforcement starting September 2025.
To address potential revenue gaps, the government has committed to withholding PSDP allocations and anticipates additional income through the resolution of tax litigation cases. So far, Rs367 billion out of Rs770 billion in disputed tax cases are being actively pursued. This includes:
- Rs43 billion pending before the Supreme Court,
- Rs217 billion in various high courts, and
- Rs104 billion with the Appellate Tribunal Inland Revenue.
A favorable Supreme Court decision could resolve Rs120 billion of the total, the IMF has acknowledged.
