Pakistan likely to urge IMF to cut tax target amid PKR 430B revenue shortfall

The Pakistan government is likely to request the International Monetary Fund (IMF) to reduce the tax collection target for fiscal year 2025-26 by about PKR 250 to PKR 300 billion as the authorities struggle bridge revenue shortfall.

Pakistan’s Federal Board of Revenue (FBR) posted a PKR 430 billion shortfall in tax collection during the first eight months of FY26 (July–February), according to official data, heightening concerns ahead of a key review by the IMF.

The poor revenue performance comes as an IMF mission is in Islamabad to conclude the third review under Pakistan’s $7 billion Extended Fund Facility. Formal talks are set to begin Monday, with tax collection expected to be a prominent topic.

The FBR collected PKR 8.12 trillion during the eight-month period against a target of PKR 8.55 trillion, missing the goal by PKR 430 billion. The gap reflects mounting challenges in meeting ambitious revenue targets amid slowing economic activity and policy constraints.

Provisional figures show the tax authority collected PKR 944 billion in February, falling short of the monthly target of PKR 1.03 trillion by PKR 85 billion.

Officials said that if the shortfall persists, the government may request a downward adjustment in the annual tax target of around PKR 250 billion to PKR 300 billion to align it with current collection trends and safeguard the agreed fiscal deficit and primary balance targets.

The IMF has already revised the annual FBR target for FY26 from PKR 14.13 trillion to PKR 13.98 trillion. Any further reduction could increase pressure on public spending, particularly the Public Sector Development Program, which often faces cuts during fiscal consolidation.

In an effort to narrow the gap, the FBR directed its Large Taxpayer Offices, Medium Taxpayer Offices, Corporate Tax Offices and Regional Tax Offices to remain open on Saturday, Feb. 28, treating it as a normal working day to facilitate tax and duty payments.

Officials attributed part of February’s slowdown to a government directive restricting the attachment of bank accounts, despite a favorable court ruling related to the Super Tax. While the FBR secured substantial Super Tax revenues in January, February collections stood at PKR 40 billion, below the targeted PKR 70 billion installment.

The shortfall underscores the fiscal pressures facing the government as it seeks to balance revenue mobilization with economic stabilization under the IMF program.

Refunds

Net income tax collection in February stood at PKR 443 billion, while sales tax revenue reached PKR 336 billion. Customs duty collections totaled PKR99 billion, and federal excise duty generated PKR67 billion during the month.

The FBR issued approximately PKR47 billion in refunds in February, bringing total refunds for July through February to PKR386 billion.

Data shows that from July to February, income tax collection reached PKR3.96 trillion against a target of PKR4.1 trillion, leaving a shortfall of PKR142 billion.

Sales tax collections amounted to PKR 3.03 trillion against a target of PKR 3.78 trillion, resulting in a shortfall of PKR 245 billion. Customs duty generated PKR850 billion compared with a target of PKR898 billion, a gap of PKR 48 billion.

Federal excise duty collections stood at PKR 532 billion, exceeding the target of PKR 526 billion.