Pakistan may need to introduce more than Rs. 700 billion in additional tax measures in the upcoming FY2026-27 budget to meet fiscal targets agreed with the International Monetary Fund (IMF), according to details emerging from recent talks between Islamabad and the global lender.
An IMF mission headed by Iva Petrova concluded its visit to Pakistan after discussions with government officials on economic performance, budget planning and ongoing reforms under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) programs.
According to the IMF, Pakistani authorities reaffirmed their commitment to achieving a primary budget surplus of 2 percent of GDP during fiscal year 2026-27 as part of efforts to strengthen fiscal stability and improve economic resilience.
Officials familiar with the negotiations said Pakistan would need additional revenue measures equal to around 0.6 percent of GDP, translating into more than Rs. 700 billion, to compensate for weak tax collection growth and maintain an upward trend in the tax-to-GDP ratio.
The IMF has reportedly urged the government to focus on broadening the tax base instead of placing a heavier burden on existing taxpayers through higher tax rates.
The Fund also emphasized the need for stronger tax administration, improved public financial management and tighter control over government spending at both federal and provincial levels.
In addition to revenue measures, the IMF stressed expenditure discipline and advised the government to keep primary expenditures broadly unchanged as a percentage of GDP. However, the Fund supported increased allocations for targeted social protection programs as well as higher spending on health and education sectors.
The IMF also warned that low-priority development projects may need to be canceled or delayed if revenue targets are not achieved during the fiscal year.
During the talks, the IMF highlighted the importance of maintaining exchange rate flexibility and developing a deeper foreign exchange market to help Pakistan absorb external economic shocks more effectively.
The Fund further recommended that Pakistan maintain adequate fiscal contingency reserves to manage risks linked to rising energy prices and regional geopolitical uncertainty. It also advised authorities to save any gains from lower debt servicing costs instead of increasing spending, allowing the country to build stronger fiscal buffers.
Both sides also reviewed progress on broader structural reforms, including energy sector restructuring, reforms of state-owned enterprises, financial sector improvements and market liberalization measures.
The next IMF review mission is expected to visit Pakistan in the second half of 2026.
