Pakistan's tax shortfall widens to Rs 606 billion this fiscal year: Report

Islamabad, Mar 1 (PTI) Pakistan's tax shortfall widened to Rs 606 billion in the first eight months of this fiscal year, piling up pressure on authorities for violating commitments made with the International Monetary Fund, a media report said.

The fund provided a USD 7 billion loan but imposed strict conditions, including on tax collection.

The Express Tribune reported that the Federal Board of Revenue (FBR) sustained a colossal shortfall of Rs 606 billion against the July-February target of Rs 7.95 trillion because it provisionally pooled Rs 7.342 trillion during this fiscal year's July-February period.

The report said it showed impressive growth of around 28 percent, but it was not enough to hit the IMF-dictated target of Rs 7.95 trillion. This resulted in a shortfall of Rs 606 billion against the target, putting the authorities under pressure.

The government again missed the monthly target of Rs 983 billion in February by a margin of Rs 138 billion, collecting only Rs 845 billion in the month. This is the seventh consecutive month of missed targets.

The FBR collected Rs 1.65 trillion more than last year, a significant achievement in an economy growing at less than 1 per cent in the first quarter.

However, the government's taxation measures and assumptions in setting the annual target of nearly Rs 13 trillion have put authorities under pressure.

The IMF compelled the country to impose new taxes, primarily burdening the salaried class and levying taxes on nearly all consumable goods, including medical tests, stationery, vegetables, and children's milk.

For the July-February period, the FBR missed its targets for sales tax, federal excise duty, and customs duty but exceeded the income tax target, according to the report.

Separately, The Express Tribune reported the World Bank announced on Friday that economic stabilisation is “taking hold” in Pakistan, marking an opportune moment to sign an agreement for a ten-year development plan.

The plan will focus on USD 20 billion in development lending to the cash-strapped country under the new Country Partnership Framework announced last month.

The funding will be directed towards areas such as clean energy and climate resilience from 2026 onwards.

Najy Benhassine, the World Bank’s Country Director for Pakistan, said in a video message on X: “This is an important moment for the partnership between the World Bank Group and Pakistan as we engage on this journey at a particular moment for Pakistan where stabilisation is taking hold and there are new ambitions and new plans for development on the long term that are very aligned with the priorities of the World Bank Group in the country.” He further said: “This is a groundbreaking joint commitment with the government of Pakistan both at the federal and provincial level to commit to focus on six of the most acute development challenges that the country is facing.” The World Bank’s lending will start in 2026, targeting six key areas -- improving education quality, addressing child stunting, boosting climate resilience, enhancing energy efficiency, fostering inclusive development, and increasing private investment.

According to the finance ministry’s monthly outlook report, Pakistan’s consumer inflation is expected to remain stable in February and continue its downward trend compared to the previous year.

Inflation has eased, with the Consumer Price Index (CPI) registering at 2.4 per cent in January, compared to 24 per cent during the same period last year.

Authorities have attributed this improvement to economic stabilisation under the IMF programme secured last summer.

The report also highlighted that foreign remittances, a vital component of Pakistan’s economy, are expected to rise.

“Workers’ remittances recorded robust inflows of USD 20.8 billion during July-January FY 2025, marking a 31.7 per cent increase over USD 15.8 billion last year,” the ministry said.

An IMF mission will arrive in Islamabad next week for the first review of Pakistan’s USD 7 billion loan facility.

The finance ministry expects the primary surplus to improve further in the coming months, a key benchmark outlined by the IMF. PTI SH PY PY PY

Source: PTI