ISLAMABAD: Pakistan and the International Monetary Fund (IMF) are close to reaching a consensus on revising the country’s macroeconomic and fiscal framework for the current fiscal year, with the Federal Board of Revenue (FBR) tax collection target expected to be reduced to Rs13.45 trillion by June 2026. Officials from Pakistan and the IMF are currently holding virtual discussions to finalise a staff-level agreement under the $7 billion Extended Fund Facility (EFF) programme.
Under the revised framework, the FBR is unlikely to achieve the tax-to-GDP ratio target of 11% that had been agreed with the IMF for the fiscal year 2025–26. During the first eight months of the fiscal year, the tax authority has already faced a revenue shortfall of Rs428 billion against its revised targets. Now, the tax-to-GDP ratio is projected to reach 10.6% by the end of June 2026, compared with 10.3% recorded in June 2025.
Officials from the IMF and Pakistan’s Ministry of Finance estimate that 1% of GDP equals around Rs1,269 billion, meaning total FBR tax collection could reach approximately Rs13.45 trillion if the 10.6% ratio materialises.
Initially, Pakistan’s parliament had approved an FBR tax collection target of Rs14.13 trillion. However, with IMF approval, the target was first reduced to Rs13.97 trillion, and it is now expected to be revised downward again to Rs13.45 trillion for the current fiscal year.
To maintain fiscal discipline under the IMF programme, the Ministry of Finance will need to adjust government expenditures in order to keep the fiscal deficit and primary surplus targets aligned with the agreement.
Pakistan has also argued that real GDP growth could reach the originally projected 4%, citing improved economic performance during the first quarter of the fiscal year.
Earlier, the IMF had revised Pakistan’s growth forecast down to 3.2% following the devastating floods that impacted the country’s economy.
Meanwhile, consumer price inflation is now expected to average between 7% and 7.5% during the current fiscal year. The Ministry of Finance had earlier projected inflation between 5% and 7%, but rising fuel prices driven by geopolitical tensions and the ongoing conflict in the Gulf region are likely to increase inflationary pressures.
On the external front, the State Bank of Pakistan (SBP) has been purchasing US dollars from the open market to strengthen its foreign exchange reserves. However, the external sector remains vulnerable due to instability in the Middle East.Despite these challenges, Pakistan’s current account deficit is expected to remain within the projected range of 0% to 1% of GDP in FY2026.
