Disagreements with IMF over tax relief force postponement of federal budget

Pakistan has postponed the federal budget announcement to June 10 amid disagreements with the International Monetary Fund (IMF) over proposed tax relief measures, government sources said.

An analyst said government is buying more time to negotiate relief for salaried class and GST on agriculture inputs.

The budget, originally scheduled for June 2, was delayed after the government failed to secure IMF approval for key proposals, including an increased tax exemption limit on salaried class, a reduction in super tax, and concessions for the housing sector.

Officials estimate these measures could create a revenue shortfall of 250-300 billion Pakistani rupees ($900 million-$1.1 billion), with no agreed-upon plan to offset the gap.

Disagreement also persist over proposed taxes on pensions, cuts to electricity subsidies, and debt payment targets.

It was also known that the IMF was uneasy with the revenue collection target, while the government seeks a relaxation on the figure exceeding PKR 14 trillion, as it would lead to over PKR 500 billion in new taxes.

The delay coincides with Eid al-Adha festivities next week, raising concerns that unpopular fiscal measures could spark public protests. Several key business leaders and government officials are also away for Hajj, further complicating budget preparations.

In a related development, the IMF’s latest country report, released May 17, noted the Pakistan’s Tajir Dost Scheme — a flagship initiative to bring small traders into the tax net — ended in failure.

The Tajir Dost Scheme, launched in April 2024, was the FBR’s biggest attempt to bring small businesses, shopkeepers, and traders into the tax system.

It made registration easier and set fixed monthly taxes to simplify payments. The goal was to build trust and show that the FBR was a "friend" to traders. However, the plan did not achieve the expected success.