IMF demands additional revenue measures after Pakistan misses tax targets

The International Monetary Fund (IMF) has asked Pakistan to implement extra revenue measures following the Federal Board of Revenue's (FBR) revenue shortfall in the first four months of the fiscal year.

The IMF also declined Pakistan's request to revise down the FBR's tax collection targets.

According to FBR sources cited by Express News, the IMF urged Pakistan to make up for the tax shortfall with additional revenue-raising steps.

During virtual discussions with the IMF, the FBR had sought a downward revision of its tax targets, but the request was denied, sources said.

The FBR’s tax shortfall may impact the disbursement of the second loan tranche, and further measures could be needed if the shortfall grows in the coming months, sources added.

Govt meets only two fiscal conditions

The ministry on Thursday released the fiscal operations summary for the July-September quarter of the current financial year. It showed that Pakistan achieved the IMF targets of primary budget surplus and net revenue collection by the four provinces.

The federal government met the major condition of a primary surplus of Rs198 billion, which in fact crossed Rs3 trillion, or 2.4% of gross domestic product (GDP). The higher surplus was mainly because of fully booking the annual central bank profit in the first quarter.

The entire estimated central bank profit of Rs2.5 trillion has been accounted for in the first quarter, which will be leveled in the coming months.

The report disclosed that Punjab's budget was in the red as it ran a deficit of Rs160 billion in three months. All other provinces enjoyed a cash surplus.

Three conditions related to generating Rs342 billion in cash surplus by the four provinces, collecting Rs10 billion from traders and achieving Rs2.652 trillion in tax target were missed by wide margins.

The Ministry of Finance's report showed that the cumulative target of Rs342 billion in the provincial cash surplus could not be met, thanks to the expansionary fiscal policies of Punjab.

The target was missed by Rs182 billion, or 53%, underscoring serious challenges in implementing a $7 billion IMF programme.