Mini-Budget Unlikely As IMF Satisfied With Pakistan’s Growth So Far

The International Monetary Fund (IMF) is satisfied with Pakistan’s tax-to-GDP ratio increase by 1.5 percentage points which has ruled out introducing additional taxes through a mini-budget. The Federal Board of Revenue (FBR) has convinced the IMF that additional emergency tax measures, including a general sales tax (GST) on petroleum products, are unnecessary. FBR officials confirmed that the annual tax target of Rs. 12.97 trillion will remain unchanged, despite a Rs. 190 billion shortfall recorded in the first four months of the current fiscal year. In a briefing on the third day of talks, FBR officials said it collected Rs. 2,562 billion in taxes from July to September. While initial revenues fell short of expectations, it remains optimistic that enhanced economic activity due to reduced interest rates and stable exchange rates will help bridge the gap. The IMF has also expressed satisfaction with the 1.5 percentage point rise in Pakistan’s tax-to-GDP ratio, which now stands at 10.3 percent. The FBR also committed to initiating tax collection on agricultural income starting the next fiscal year. Progress on tax reforms continues, with the draft Tax Laws Amendment Ordinance 2024 presented to the prime minister. This ordinance introduces a family income tax return system and eliminates the concepts of non-filers and late filers. The IMF, however, has urged Pakistan to expand its tax net, particularly at the provincial level, and emphasized advancing legislative measures for agricultural income tax collection. Discussions are ongoing with the IMF mission regarding the Tajir Dost Scheme to broaden the tax net among traders. To date, Rs12 billion has been collected from retailers, with the number of registered traders surging from 200,000 to 600,000 after 400,000 new tax returns were submitted.