Pakistan Faces Rs3.1T Tax Shortfall, IMF Briefed

Pakistan has informed the International Monetary Fund (IMF) that it is likely to miss its Rs3.1 trillion tax collection target for the July–September quarter, with authorities projecting revenue to fall below Rs2.95 trillion, according to The Express Tribune.

The Federal Board of Revenue (FBR) briefed the IMF on the revenue shortfall, attributing it to flood-related disruptions, sluggish economic activity, and declining electricity demand. However, officials expressed optimism that rising inflation, stronger economic growth, and increased solar panel imports could partially offset the deficit.

These discussions were part of ongoing negotiations for the release of a $1 billion loan tranche under the Extended Fund Facility (EFF) and $220 million under the Resilience and Sustainability Facility (RSF).

The IMF inquired about the FBR’s revenue projections, the impact of floods on collections, and strategies to enhance compliance. Officials cautioned that the previous fiscal year’s Rs1.2 trillion shortfall serves as a stark warning.

Customs authorities reported a 16% increase in import tax collection during the first two months of the fiscal year, despite reduced regulatory duties, with overall imports rising 9% in dollar terms.

The FBR anticipates Rs190 billion in additional revenue through enforcement measures and projects that a 10% tax on solar panel imports from erstwhile FATA will contribute further, having already collected Rs6 billion in the first two months against an Rs18 billion target.

The IMF was also updated on the Rs1.25 trillion circular debt settlement in the power sector, funded through bank borrowings. However, the FBR raised concerns about potential revenue losses due to falling electricity demand, driven by higher prices, economic slowdown, and policy reforms mandated by the IMF, World Bank, and Energy Ministry