The Pakistan government’s revenue shortfall has become a significant challenge for the IMF Programme. These revenues are crucial for Pakistan’s IMF loan agreements, which emphasize aggressive tax expansion to achieve revenue targets and secure funds. The Federal Board of Revenue (FBR) is striving to meet a revised target of over Rs 13 trillion, including tax hikes and revenue reforms in agriculture and property.
In the first three quarters of 2025-26, the FBR’s tax collection fell short of the target. The actual collection of Rs 9,307 billion is below the target of Rs 9,917 billion, resulting in a shortfall of Rs 610 billion. To meet the lower revised target, a high revenue growth rate of 19 percent is required in 2025-26.
For income tax collections in 2025-26, the target is Rs 6,967 billion with a growth rate of 20.3 percent. However, the actual collection of Rs 4,636 billion falls short by Rs 235 billion, achieving only a 12 percent growth rate. Sales tax revenues targeted at Rs 4,580 billion face a shortfall of Rs 313 billion, with a growth rate of only 9 percent during the first three quarters.
The customs duty and excise duty have shown relatively minor deviations from their targets. While there is a shortfall of Rs 30 billion in customs duty, excise duty revenues have exceeded the nine-month target by Rs 5 billion. The projection of a 12 percent decline in the value of the rupee by June 2026 has not materialized, raising uncertainty about future revenues.
Assessing the fourth quarter of 2025-26, uncertainties due to the Middle East war have clouded revenue projections. Import shortages may occur if traffic disruptions in the Strait of Hormuz persist, impacting import prices. The outcome of sales tax on imports and customs duty revenues in the fourth quarter remains uncertain amidst global economic upheavals.
