Pakistan Shares Backup Tax Plan with IMF to Avoid Mini Budget

Pakistan has submitted a contingency fiscal plan to the International Monetary Fund to avoid a mid-year mini-budget as revenue shortfalls begin to emerge, official documents reviewed by the Fund show.

The IMF report warns that the Federal Board of Revenue may fall short of its annual target, prompting the government to prepare corrective measures well before the December 2025 revenue review.

To mitigate the expected gap, the government has assured the IMF that it is ready to introduce new taxation steps and enforce strict expenditure controls if collection remains below projections.

According to the plan shared with the Fund, Pakistan has proposed several revenue-raising measures. These include increasing excise duty by 5 percent on fertilizers and pesticides, and introducing fresh taxes on high-value sugar products to widen the revenue base.

The report states that an 18 percent sales tax is also being considered for selected items currently taxed at reduced or zero-rated levels. Officials believe this will help mobilize additional revenue in the second half of the fiscal year.

Alongside new taxes, the government has outlined steps to cut non-essential expenditures if revenue pressures continue.

The IMF noted that Pakistan’s willingness to take early corrective action will be vital for maintaining fiscal discipline and meeting quarterly performance criteria under the ongoing program.

The government reiterated in its communication with the Fund that raising the tax-to-GDP ratio to 15 percent remains a long-term priority under IMF-supported structural reforms aimed at restoring fiscal sustainability.