FBR misses IMF target by Rs975b
The FBR collected Rs6.6 trillion in income tax, missing the goal by Rs323 billion. Receipts were 13.5% higher than last year, inclusive of super tax. photo:file
Pakistan has missed the International Monetary Fund (IMF) condition on federal tax collection by a margin of Rs975 billion, as the Federal Board of Revenue (FBR) only managed to collect Rs13 trillion during the just-ended fiscal year.
The collection was in line with the FBR's downward assessment of Rs13 trillion made in June after missing targets for the first 11 months. The banking system had cleared Rs12.97 trillion, with the remaining about Rs33 billion expected to be cleared by midnight, said tax authorities at the close of the fiscal year. It was the second consecutive year the tax authorities failed to achieve the goal by close to Rs1 trillion or more. In dollar terms, the FBR collected $4 billion less than the assigned target of Rs14.13 trillion set by the IMF and the government of Prime Minister Shehbaz Sharif in June last year. Subsequently, the IMF lowered the target to Rs13.979 trillion and maintained it at this level during the May review talks.
However, the FBR cannot afford to miss the new fiscal year's Rs15.264 trillion target, whose achievement is now critical for meeting three national goals: security of territorial borders, water security and food and fuel security. Only if the FBR collects Rs15.264 trillion can the additional spending requirements for achieving these goals be met. The FBR's tax-to-GDP ratio – the real barometer of how the nation's taxes are growing – marginally fell to 10.2% during the just-ended fiscal year. The FBR remained unable to achieve its monthly targets, despite taking additional revenue measures in June last year and taking advantage of higher-than-targeted inflation. But the exchange rate remained stable, which partially dented import revenues.
According to provisional results, the FBR collected Rs13.003 trillion in taxes during FY2025-26, which ended on Tuesday. The tax machinery fell behind the downward revised IMF target by a wide margin of Rs975 billion.
Finance Minister Muhammad Aurangzeb and FBR Chairman Rashid Langrial have lately started quoting collection figures in dollar terms, despite taxes being collected in rupees. The government had assigned the $50 billion equivalent tax target to the FBR in June last year. But it could collect $46 billion, causing a $4 billion shortfall – more than half of the $7 billion bailout package obtained from the IMF in return for implementing more than 75 conditions. During the second review talks, the IMF had lowered the target by Rs151 billion, which it kept unchanged during the last review talks despite requests by the FBR to cut it to under Rs13.5 trillion. The Extended Fund Facility programme targets for end-June 2026 remain the same, and forward-looking targets can only be changed at the next review, followed by board approval.
However, despite the IMF's refusal to further lower the targets, the FBR reduced it to Rs12.893 trillion after failing to achieve previous monthly targets. But this did not change any reality for the IMF.
The Express Tribune sent questions to the FBR spokesman and requested him to comment on the IMF's May 2026 staff report, which mentions the FBR annual target at Rs13.979 trillion for FY2026. He was also asked which federal authority reduced the FBR's target to Rs12.893 trillion and why the IMF was not on board. "The Rs12.983 trillion figure is the revised estimate for FY2025-26 carried in the Annual Budget Statement, approved by parliament as part of the federal budget process, which includes consultation with the IMF on fiscal parameters," said the FBR spokesperson.
There was a 10.7% increase in collection during the just-ended fiscal year compared with a year ago. The 10.7% growth rate was even lower than the nominal economic growth rate of 14%. The FBR cleared Rs588 billion worth of refunds, which was Rs115 billion higher than last year.
The government kept offsetting the tax shortfall with increases in petroleum levy rates and by drastically reducing development spending. This has been done to achieve the overall primary budget surplus target agreed with the IMF.
All sub-targets missed
The FBR collected Rs6.6 trillion in income tax, missing the goal by Rs323 billion. Receipts were 13.5% higher than last year, inclusive of super tax that the FBR recovered after the court ruled in its favour this year.
Sales tax collection amounted to Rs4.265 trillion, behind the target by Rs494 billion. It was 9.3% higher than last year. Federal excise duty collection reached Rs840 billion, up 9.7%, but missed the target by Rs51 billion. Customs duty collection fell short by Rs108 billion, amounting to Rs1.33 trillion, with growth of less than 1% despite an increase in the import bill.
New year
For the new fiscal year, the government has set the Rs15.264 trillion target for the FBR. It would now require a 17.4% growth rate to achieve the target. The government has introduced over Rs1 trillion in policy and enforcement measures in the budget.
The FBR's Rs15.264 trillion target is the linchpin for the success of the new budget, including ensuring Rs3 trillion spending on defence, building mega dams and keeping fuel prices stabilised.
The provinces will receive their 57.5% share in the divisible pool based on Rs13.35 trillion collection, and the remaining Rs1.035 trillion of their shares has been surrendered in favour of the federal government to finance higher defence spending, mega dams and fuel price stabilisation. The Rs1.035 trillion grant is contingent upon achieving the Rs15.264 trillion target, and any shortfall would reduce the grant component proportionately.