Pakistan’s federal tax revenue is expected to show little improvement over the next five years, according to a new assessment by IMF.
The Fund said that despite a noticeable jump in the tax-to-GDP ratio in FY25, most future revenue growth will come from provincial taxes not federal collections.
The IMF noted that FBR receipts increased from 8.9% of GDP in FY24 to 10.3% in FY25 as a result of stricter measures and nearly Rs. 2.5 trillion in additional taxes. However, revenue still missed the IMF programme target of 10.7%.
For the current fiscal year, the IMF expects FBR revenue to rise to 11.1% of GDP but believes it will remain stuck at this level until FY30.
In rupee terms, federal revenue grew from Rs. 9.3 trillion in FY24 to Rs. 11.74 trillion in FY25, while current year estimates stand at nearly Rs. 14 trillion indicating a possible shortfall of Rs. 328 billion.
The IMF also pointed out that tax revenue for FY25 missed budget targets by over Rs1.2 trillion due to weaker GDP growth, lower inflation, delayed tax cases, and enforcement challenges.
Meanwhile, provincial revenue is forecast to grow strongly due to agricultural income tax expansion and broader sales tax on services. Provincial tax-to-GDP contribution is projected to rise from 0.9% in FY25 to 1.6% by FY28.
The Fund expects Pakistan’s fiscal deficit to gradually fall from 5.4% of GDP in FY25 to 2.8% by FY30, if reforms continue.