Pakistan set to meet most IMF targets, but tax shortfall persists

Pakistan is likely to meet nearly all of its key quantitative performance criteria under the International Monetary Fund program, although tax revenue collection remains below target, the head of research at Topline Securities said on Tuesday.

An IMF mission is expected to arrive in the last week of February for the third review of Pakistan’s Extended Fund Facility and the second review of the Resilience and Sustainability Facility. The review will assess performance against targets set for September and December.

“Based on our calculations, Pakistan is likely to meet nearly all seven quantitative performance criteria,” said Shankar Talreja, head of research at Topline Securities. “Data for one indicator — the floor on targeted cash transfers — is not yet known. This was missed in the last review by just PKR 1 billion.”

What are QPCs?

Quantitative performance criteria (QPCs) are key benchmarks under IMF programs that require board-level waivers if missed.

Talreja noted Pakistan’s Net International Reserves (NIR) are projected to remain above the benchmark floors. NIR is expected to stay below negative $6.7 billion against a floor of negative $7 billion for September, and below negative $6 billion against a benchmark of negative $6.5 billion for December.

The Net Domestic Assets (NDA) of the State Bank of Pakistan are estimated in the range of PKR 12.5 trillion to 13.5 trillion, compared with ceiling targets of PKR 14.9 trillion to 15.1 trillion for September and December.

Foreign currency swaps stood at $2.2 billion and PKR 1.86 trillion for September and December, respectively, compared with ceilings of $2.25 billion and $2.0 billion, he said.

Pakistan’s primary surplus is projected at PKR 3.5 trillion for September and PKR 4.1 trillion for December, significantly above the respective targets of PKR 460 billion and PKR 3.2 trillion.

Government guarantees, the floor on cash transfer spending and the target for new tax filers are also expected to be met, Talreja said, citing channel checks.

Pressures remain

However, tax collection remains under pressure. The Federal Board of Revenue has missed its revenue target PKR by 336 billion based on published figures, he said.

“We believe a portion of this shortfall could be recovered through the verdict pertaining to the Super Tax,” Talreja said. “However, in our view, overall collection is still likely to remain below the annual target.”

The upcoming review by the International Monetary Fund will be critical in determining the next tranche of funding and assessing Pakistan’s adherence to reform commitments under the program.

Talreja said meeting the QPCs would reduce the risk of delays in IMF disbursements and help maintain macroeconomic stability. However, he cautioned that continued shortfalls in tax revenues could complicate fiscal management, particularly if one-off measures such as the Super Tax fail to fully bridge the gap.