Pakistan has entered technical-level discussions with the International Monetary Fund (IMF), where the Fund raised concerns over the Federal Board of Revenue’s (FBR) revenue shortfall of Rs1.2 trillion in FY2024-25. Against an initial target of Rs12.97 trillion, the FBR collected Rs11.74 trillion despite imposing Rs1.3 trillion in additional taxes and revising targets downward twice. Officials attributed part of the shortfall to Rs250 billion in pending recoveries tied up in litigation.
During the first two months of FY2025-26, Pakistan secured $1.377 billion in external financing, far below the full-year projection of $19.9 billion. Bilateral inflows stood at $232 million, including $200 million from Saudi Arabia under its oil facility. Multilateral lenders, led by the World Bank, contributed $780 million, with additional disbursements from the Asian Development Bank, Islamic Development Bank, and Asian Infrastructure Investment Bank.
Talks also covered fiscal developments, expenditure patterns, NFC distribution, and foreign reserves. The government proposed reforms to the National Finance Commission (NFC) Award formula, suggesting that provinces’ current 82% population-based share could be adjusted by adding weightage for tax performance and population density. Additionally, the Benazir Income Support Programme (BISP) may be devolved to provinces to encourage stronger revenue mobilization. President Asif Ali Zardari recently appointed Finance Minister Muhammad Aurangzeb as chairman of the 11th NFC, which includes nine members such as provincial finance ministers and technocrats.
Officials informed the IMF that government expenditure climbed to 21.4% of GDP in FY2024-25, up from 19.5% a year earlier. The fiscal deficit crossed Rs6.1 trillion, though provinces managed surpluses that helped achieve the primary balance target.
Breakdowns showed federal net revenue at Rs9.946 trillion against Rs17.036 trillion in spending. Debt servicing consumed Rs8.9 trillion, while defence outlays reached Rs2.193 trillion. Provinces collectively received Rs6.854 trillion, with Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan all reporting surpluses.
IMF Flags Rs1.2 Trillion FBR Tax Gap Amid Fiscal Strain
