Fund says tax exemptions can only be considered in FY2026–27 budget amid revenue pressures
The International Monetary Fund (IMF) has turned down Pakistan’s request to immediately withdraw the 18% general sales tax (GST) on contraceptives and sanitary pads, rejecting a proposal submitted by the Federal Board of Revenue (FBR), The News reported, citing official sources.
The matter was taken up during a virtual meeting with IMF officials, who ruled out any mid-year tax exemptions under the ongoing programme. The Fund maintained that tax relief measures could only be reviewed as part of the federal budget for 2026–27, not during the current fiscal year.
According to officials, the FBR had estimated that removing GST on contraceptives would have a revenue impact of Rs400–600 million. The proposal was raised following the prime minister’s directive in August 2025 to improve affordability of birth control products.
However, the IMF’s Fiscal Affairs Department showed little flexibility, citing Pakistan’s challenges in achieving its revised revenue target of Rs13.979 trillion for FY2025–26.
Proposals to reduce GST on sanitary pads and baby diapers were also rejected. The IMF pointed to significant revenue implications, particularly in the baby diaper segment, where the market size is estimated at around Rs100 billion.
The Fund further cautioned that granting tax exemptions on such items could complicate tax administration and heighten the risk of smuggling. Pakistan’s population growth rate currently stands at 2.55%, one of the highest in the world, with nearly six million people added to the population each year.
