The Pakistan government has directed provincial administrations to raise more than 400 billion PKR in additional taxes in the next fiscal year as the cash-strapped nation struggles to meet strict conditions set by the International Monetary Fund (IMF), according to a report by The Express Tribune.
The move is likely to increase pressure on citizens already battling high inflation and economic uncertainty. Combined additional taxation targets under the federal and provincial budgets are expected to exceed Rs 1.1 trillion for FY2026-27.
Pakistan Finance Minister Muhammad Aurangzeb held a virtual meeting with provincial finance ministers to discuss new revenue goals linked to IMF commitments, government officials said.
Under the proposed plan, the federal government is expected to raise nearly Rs 700 billion through fresh tax measures, tougher enforcement and higher petroleum levy collections, while provinces have been asked to mobilise over Rs 400 billion in additional revenues, The Express Tribune reported.
According to reports, Sindh has been given the highest target of around Rs 200 billion, followed by Punjab with Rs 175 billion, Khyber Pakhtunkhwa with Rs 45 billion and Balochistan with nearly Rs 20 billion.
The latest measures come as Pakistan continues to rely heavily on IMF assistance to stabilise its fragile economy amid rising fiscal pressures and persistent revenue shortfalls. The IMF has reportedly asked provinces to increase tax collection equivalent to 0.3 per cent of GDP, or around Rs 430 billion.
Pakistan is also facing a widening fiscal imbalance, with the government dealing with an estimated revenue shortfall of nearly Rs 1 trillion due to the weak performance of the Federal Board of Revenue (FBR).
To bridge the gap, authorities are relying on aggressive tax drives, higher petroleum levies and cuts in development spending, the report said.
The IMF has further urged Pakistan to improve tax collection from sectors considered undertaxed, particularly agriculture, real estate and services. According to the IMF assessment, agriculture contributes nearly 24.6 per cent to Pakistan’s economy but faces an effective tax rate of only 0.3 per cent.
In contrast, petroleum products continue to face extremely high taxation, with the IMF reportedly estimating the effective tax rate on petroleum at 166 per cent. Pakistan is expected to collect Rs 1.727 trillion through petroleum levies in the next fiscal year, nearly Rs 260 billion higher than the current target.
The IMF also pointed to delays and weak enforcement in implementing agricultural income tax reforms despite repeated commitments by Pakistani authorities. Provinces have now been directed to expand the GST net on services, improve property tax collection and strengthen enforcement mechanisms.
Pakistan has additionally assured the IMF that provincial governments will avoid introducing policies that could undermine commitments made under the lender’s reform programme.
