With $19 billion in loan repayments looming, the IMF is pressing Islamabad to keep its debt servicing on a sustainable track
By our correspondent
ISLAMABAD: The International Monetary Fund (IMF) has called on Pakistan to raise its total revenue collection to Rs2 trillion in the upcoming fiscal year, a significant increase from the current Rs1.78 trillion. The suggestion comes at a crucial moment as Pakistan prepares for policy-level budget negotiations with the IMF, set to commence tomorrow.
Officials within the Federal Board of Revenue (FBR) have confirmed that the IMF is not only pushing for a broader tax base but also demanding tighter controls over non-developmental expenditures. With nearly $19 billion due in foreign loan repayments next year, the IMF is pressing Islamabad to ensure that its debt servicing remains on sustainable footing. The emphasis is clear: without structural reforms and prudent spending, Pakistan risks slipping deeper into fiscal vulnerability.
The upcoming budget talks are expected to be anything but routine. According to sources familiar with the negotiations, Pakistan is looking to remove the withholding tax on raw materials for the construction sector and on property transactions—both moves aimed at spurring economic activity. There are also discussions underway to abolish the federal excise duty (FED) and the contentious super tax on property sales. Additionally, the government is weighing options to provide tax relief to salaried individuals, a segment that has increasingly borne the brunt of inflation and previous fiscal tightening.
Despite the anticipated relief measures, Islamabad will be walking a tightrope. It will need to convince the IMF of its ability to simultaneously stimulate the economy and raise the tax-to-GDP ratio to 11 percent. This assurance is likely to become a key point of negotiation, as the IMF insists on revenue reforms to underpin any future financial support.
The talks come at a time of economic fragility, where balancing growth and fiscal discipline remains a daunting task for Pakistan’s economic planners. As the country inches closer to presenting its federal budget, all eyes will be on how the government navigates this round of IMF engagement—whether it bends, bargains, or boldly proposes a pathway that addresses domestic needs while satisfying global lenders.
