IMF Pressure Mounts: Pakistan Faces Mini Budget as Tax Targets Missed

Islamabad, Pakistan – The Federal Board of Revenue (FBR) is struggling to meet its tax collection targets, prompting concerns that a mini budget may be imminent. With a staggering Rs2,654 billion needed in the first quarter of the fiscal year 2024-25, and Rs 1,190 billion required in September alone, the pressure is mounting.

Failure to meet these targets by the end of the first quarter may trigger demands from the International Monetary Fund (IMF) for a mini budget, a prerequisite for securing a $7 billion loan deal. In a bid to boost tax collection, the government is mulling measures such as stricter enforcement against defaulters and potential amendments to the Finance Bill.

Meanwhile, individuals who fail to submit their income tax returns by September 30 risk being classified as late filers, incurring higher withholding taxes on income, vehicle token taxes, and property-related transactions. The proposed mini-budget may also grant tax authorities additional powers, paving the way for more aggressive action against non-compliance.

The IMF has expressed concerns over the burgeoning circular debt in Pakistan’s power sector, which has remained stagnant at Rs2.6 trillion (2.5% of GDP) since October 2023. As Pakistan navigates these fiscal challenges, the likelihood of a mini budget looms large.