IMF Monitors FBR’s Revenue Shortfall as Tax Collection Misses Target by Rs198bn

ISLAMABAD: Pakistan’s faltering tax collection has drawn concern from the International Monetary Fund (IMF), which is closely monitoring the Federal Board of Revenue’s (FBR) performance amid fears of a potential revenue gap in the current fiscal year.

According to officials cited by Business Recorder, the issue of slower-than-expected revenue collection was a central topic during the IMF’s ongoing policy-level discussions with Pakistani authorities.

During the first quarter (July–September) of FY2025–26, the FBR collected Rs2.885 trillion against a target of Rs3.083 trillion, reflecting a shortfall of Rs198 billion. In September alone, the board’s collection stood at Rs1.23 trillion, missing the monthly goal of Rs1.368 trillion.

Officials warned that the shortfall could surpass Rs400 billion by the end of the fiscal year, potentially forcing the government to review the annual target of Rs14.13 trillion. However, they clarified that no decision has yet been taken to revise the goal downward.

Finance Minister Muhammad Aurangzeb has ruled out the possibility of a mini-budget, asserting that “no new taxation or revenue measures are under consideration at this stage.” An FBR official confirmed that no work has been initiated on new tax proposals.

Instead, the revenue authority is focusing on administrative reforms and digitalisation to improve efficiency. The FBR has begun hiring 1,600 auditors to enhance audit capacity and introduced digital monitoring systems in major sectors, including sugar, cement, beverages, fertiliser, and textiles.

Under its Transformation Plan, the FBR is integrating data sources, digitising internal processes, and leveraging artificial intelligence for audit selection to identify tax evasion and close the tax gap.

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Officials highlighted that these reforms have already yielded results, with the tax-to-GDP ratio rising from 8.8 percent in FY2023–24 to 10.24 percent in FY2024–25, while enforcement revenue increased eightfold.

The IMF’s last review under the Stand-By Arrangement (SBA) had identified eight contingency measures worth Rs216 billion annually, including higher sales tax rates on the textile and leather sectors, a federal excise duty on sugar, and increased advance income and withholding taxes on imports, services, and contracts.

Analysts believe that if the current revenue trajectory persists, Pakistan may face pressure from the IMF to activate some of these contingency measures to stay on track with its fiscal targets.