ISLAMABAD: The International Monetary Fund (IMF) has agreed to cut Pakistan’s tax collection target by Rs150 billion for the upcoming fiscal year, a move aimed at providing fiscal relief amid economic losses caused by devastating floods, according to a report by ARY News on Thursday.
Under the revised arrangement, the Federal Board of Revenue (FBR) tax target for FY2025–26 will be reduced from Rs14,131 billion to Rs13,981 billion. The FBR is already grappling with a shortfall of Rs199 billion in the first quarter of the current fiscal year.
Earlier, Prime Minister Shehbaz Sharif had proposed a Rs250 billion reduction, but the IMF agreed to a Rs150 billion cut. Officials said the government’s objective was to avoid imposing new taxes while keeping revenue projections realistic amid economic pressures.
Economic Impact of Floods
The IMF’s latest Regional Economic Outlook for the Middle East and Central Asia warned that the recent monsoon floods have had a severe impact on Pakistan’s economy — slowing growth, increasing inflation, and widening the current account deficit.
The Fund projects Pakistan’s GDP growth to remain at 3.6% in the current fiscal year, below the government’s target of 4.2%. Damage to agriculture, road networks, and housing has been particularly severe, with the IMF cautioning that these losses will “reduce income and drive up prices.”
Inflation Pressures Ahead
The IMF also warned of renewed inflationary pressure in the coming months due to the rollback of electricity subsidies, tariff hikes, and continued supply disruptions caused by the floods. Food and energy prices are expected to bear the brunt of these shocks.
The revised tax target is expected to give the government some fiscal breathing space as it navigates post-flood recovery and seeks to maintain compliance with IMF programme goals without burdening citizens with additional taxation.
