In response to a serious revenue shortfall, Pakistan’s government is drafting an alternative fiscal strategy to meet its financial commitments and secure essential support from the International Monetary Fund (IMF). The Federal Board of Revenue (FBR) reported a revenue shortfall of Rs. 192 billion within the first four months of the fiscal year, well below the national target. This shortfall has prompted Pakistan to consider a “mini-budget” aimed at enhancing revenue through increased taxes and new levies.
Key measures under consideration include a 5% increase in excise duty on sugary drinks, which would yield around Rs. 2.3 billion monthly, and a 1% advance tax on industrial raw materials and machinery imports, generating an additional Rs. 5.5 billion each month. These proposed adjustments follow a trend of recent tax reforms, reflecting Pakistan’s ongoing struggle to balance economic stability with the IMF’s stringent fiscal requirements for continued loan disbursement
The IMF’s conditions for Pakistan’s $7 billion bailout program require meeting set fiscal targets and introducing broader taxation measures, including potentially higher GST rates and removal of tax exemptions on goods like luxury imports. Beyond the immediate measures, Pakistan aims to implement a more progressive tax system with increases on certain income brackets, real estate, and possibly agricultural income. Achieving the target revenue of Rs. 2.157 trillion by the fiscal year-end will be crucial for stabilizing Pakistan’s budget and securing future IMF support, which remains essential for the country’s economic stability amid persistent fiscal challenges and inflationary pressures.
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