FBR Faces Revenue Shortfall, but Optimism for Recovery in Final Quarter of FY 2024-25

The Federal Board of Revenue (FBR) has provisionally collected Rs872 billion in January 2025, falling short of its target of Rs956 billion by Rs84 billion. This shortfall contributes to a cumulative revenue gap of Rs468 billion for the first seven months (July-January) of fiscal year 2024-25.

As per sources, the FBR’s total revenue collection for the first seven months of the ongoing fiscal year stands at Rs6,496 billion, falling short of the assigned target of Rs6,964 billion.

While a slower pace of revenue collection is expected to persist in February, officials anticipate that the final quarter of the fiscal year will see a recovery, which could mitigate further losses.

The increase in palm oil imports expected by March 2024 is anticipated to boost tax revenues, particularly from import duties, helping to close the revenue gap in the coming months.

According to FBR officials, the International Monetary Fund (IMF) assesses tax collection on a quarterly basis rather than monthly. The target for revenue collection from January to March is set at Rs3,150 billion, and FBR expects better results in March as economic activity picks up.

The FBR had faced a shortfall of Rs386 billion in the first half of the 2024-25 fiscal year.

On Thursday, FBR Chairman Rashid Mahmood Langrial informed the Senate Standing Committee on Finance that the Rs386 billion shortfall in the first half of FY25 was mainly due to weaker-than-expected autonomous growth. He linked this to factors such as exchange rate stability, lower inflation, and sluggish growth in the GDP and manufacturing sectors.

Langrial projected the shortfall could rise to Rs447 billion by February 2025 but expressed confidence that revenue growth would accelerate in the final four months of the fiscal year, helping to prevent further losses.

He also noted that policy measures introduced in the Finance Act 2024, which were expected to generate Rs1.3 trillion, have not performed as expected due to shifts in behavior among real estate investors and traders, along with estimation errors.

Despite the shortfall, the tax-to-GDP ratio has seen some improvement, rising from 9.5 percent in the first quarter to 10.8 percent in the second quarter, although it still remains below the IMF's target of 13.6 percent by the end of the program.