Introduction / Executive Summary

Pakistan availed IMF’s Extended Fund Facility (EFF) in June 2024. This was an effort to address the prevailing economic problems in the country. This $7.5 billion loan was aimed at initiating critical reforms in the economy. The four key focus areas of this program were:

1. Strengthening policy-making credibility and economic stability through consistent and systematic implementation and the broadening of the tax base
2. Improving competition, productivity and competitiveness through reforms
3. Reforming state-owned enterprises (SOEs) and ensuring the sustainability of the energy sector;
4. Building climate resilience.

The IMF completed its first review in March 2025 when the IMF team assessed the country’s progress on various economic reforms. Despite the country’s progress, including the signing of the National Fiscal Pact and the amendment of agricultural tax laws by provincial governments, a major concern was the significant tax revenue shortfall.

As of the end of March 2025, the FBR reported a tax collection of PKR 8.44 trillion, falling short of the nine-month target of PKR 9.17 trillion by PKR 725 billion. This shortfall raised concerns about the government's ability to meet its annual tax collection target of PKR 12.97 trillion1 . In response, the IMF agreed to revise the annual target downward by PKR 620 billion, setting a new target of PKR 12.35 trillion, while maintaining the tax-to-GDP ratio goal of 10.6%.

Regardless of these changes in the tax revenue, the IMF emphasized the need to put in place additional revenue measures and improve tax administration to address the persistent shortfall. The FBR has been directed to speed up the process to broaden the tax base, enhance compliance and resolve pending tax disputes in order to increase revenue generation in the remaining half of the fiscal year.