Pakistan, IMF agree to raise tax-to-GDP ratio to 11.2% for FY26

Pakistan and the International Monetary Fund (IMF) have reached an agreement to raise the tax-to-GDP ratio target to 11.2% for the next fiscal year, according to sources within the Federal Board of Revenue (FBR).

The target will be based on the estimated GDP size for the upcoming fiscal year.

Sources indicate that the current fiscal year’s tax-to-GDP ratio target of 10.6% is expected to be achieved, with the ratio already reaching approximately 10.8%.

Under the IMF loan program, the tax-to-GDP ratio is set to increase incrementally, reaching 13% over the next two years.

Virtual discussions between Pakistan and the IMF are ongoing to finalize budget targets. The IMF Executive Board will approve the second tranche of the loan program once the budget proposals are completed.

However, sources suggest that the revised revenue collection target of PKR 12.3 trillion for the current fiscal year may face a shortfall.

In the upcoming budget, the completion of ongoing projects will be prioritized, with only a few critical new projects included.

The Ministry of Planning has requested PKR 3 trillion from the Finance Ministry for development projects, aiming to complete ongoing schemes.

Despite this, the Finance Ministry has not committed to providing the requested funds, and over PKR 12 trillion is reportedly required to complete ongoing Public Sector Development Program (PSDP) projects.

Sources from the Planning Commission have revealed that the current fiscal year’s annual development budget will not be fully utilized. The next PSDP will focus on ongoing projects rather than introducing new ones.