ISLAMABAD – Pakistan is facing tough fiscal challenges as the country fell short of its tax target by nearly Rs200 billion.
International Monetary Fund (IMF) proposed imposing new taxes on Pakistan to manage massive R200 billion revenue shortfall in first quarter of the current fiscal year, raising fresh concerns over the country’s fragile economic stability.
During second semi-annual economic review, the global lender warned that escalating regional tensions could severely impact Pakistan’s external stability. According to sources, the fund cautioned that rising conflicts might drive up commodity prices and slow down economic growth, while ongoing global uncertainties threaten to shake foreign investor confidence.
To counter the revenue gap, IMF recommended increasing Excise Duty on fertilizer from 5% to 10% and introducing a new 5% Levy on agricultural pesticides. However, the government has requested a one-year reprieve, citing the devastating impact of recent floods.
Sources also revealed that IMF suggested adjusting the annual tax target of Rs14,131 billion in proportion to the shortfall, signaling a tense road ahead for Pakistan’s fiscal management.
No Mini Budget
Earlier, there were reports of additional taxes on the auto and banking sectors but Finance Minister clears that there are no current plans for a mini-budget to address revenue shortfalls.
Aurangzeb stressed government’s commitment to achieving IMF target of an 11% tax-to-GDP ratio for this fiscal year.
Experts stress that instead of introducing new taxes, the focus should be on curbing tax evasion and improving compliance, as Pakistan’s tax-to-GDP ratio remains one of the lowest globally. Rising inflation, along with petroleum pricing policies and the impact of recent floods, limits citizens’ ability to bear additional financial burdens.
‘Mini-budget on cards’ as Pakistan struggles to meet tax targets
