The International Monetary Fund recommended significant fiscal reforms for Pakistan during the ongoing budget discussions. The meeting included phasing out federal funding for provincial development projects under the Public Sector Development Programme.
In virtual meetings with provincial authorities, IMF officials emphasised the need for provinces to become financially self sufficient. Provincial revenue generation would generate stability.
Notably, starting July 2025, an agricultural income tax on earnings above PKR 600,000 annually without exemptions will be implemented. While seeing Pakistan’s current fiscal performance, the Fund secured provincial commits to achieve budget surpluses in the upcoming fiscal year.
As part of broader economic restructuring, the IMF proposed raising Pakistan’s tax collection target to Rs 14.3 trillion for 2025-26, requiring an additional Rs 430 billion in revenue through base broadening measures.
These include expediting the resolution of tax disputes and strengthening enforcement mechanisms. An IMF delegation is scheduled to arrive in Islamabad on May 18 for in-person negotiations with finance ministry officials.
The Planning Commission, FBR, and State Bank representatives will finalise these budgetary adjustments. The proposed reforms aim to reduce fiscal imbalances while challenging Pakistan’s established intergovernmental financial arrangements.