ISLAMABAD: With the possibility of revision in the macroeconomic framework, the government will have to convince the IMF to slash down the FBR’s envisaged tax collection target, provided expenditures are curtailed proportionally to achieve the mutually agreed primary surplus.
Some interesting proposals have surfaced to divert BISP resources towards flood-affected areas. How this proposal can be materialised is not yet known, as a selection of beneficiaries is receiving installments. What will happen to them if allocated resources are diverted towards flood-affected areas?
Pakistan and the IMF are scheduled to hold parleys from September 25 in Islamabad under the second review of $7 billion Extended Fund Facility (EFF). “There are two options, either to slash down FBR’s tax collection target if expenditure is curtailed or raise revenue through additional revenue measures to achieve the agreed primary surplus by the end of June 2026,” top official sources told The News here on Monday.
Pakistan and the IMF have agreed that the FBR’s tax collection would stand at Rs3.023 trillion till the end of September 2025. There are some internal estimates that the FBR might be heading towards a possible revenue shortfall by the end of the ongoing month in the range of Rs100 billion, keeping in view the slowdown in economic activities in the aftermath of continuous disastrous flash floods. “We have been left with no other option, either to reduce the expenditures in accordance with the expected shortfall or come up with additional revenue measures to mitigate pressure on the expenditure front,” said the official.
The overall size of the GDP is expected to be reduced in the wake of decreased GDP growth from the envisaged target of 4.2 percent of the GDP but there is a challenge for the policymakers that the CPI-based inflation might go up so overall nominal GDP might not change too much. In such a scenario, the IMF might insist upon taking additional revenue measures to finance flood-related expenditures.
Pakistan has envisaged a primary surplus target of 2.4 percent of GDP, equivalent to Rs3.17 trillion, for the current fiscal year. On the issue of waiving of electricity bills in flood-affected areas, the official said that they were working out the exact cost of this relief.
When contacted, the IMF’s Resident Mission Chief, Mahir Binci, for comments, he said that the upcoming EFF review mission provides an opportunity to discuss the appropriate policy response to support flood-affected populations and protect the most vulnerable.
The mission will assess whether the FY26 budget, its spending allocations, and emergency provisions remain sufficiently agile to address the spending needs necessitated by the floods. In May, the Board approved the authorities’ request for an arrangement under the RSF, which will support Pakistan’s efforts in building economic resilience to climate vulnerabilities and natural disasters, with access to around $1.4 billion. The disbursement of RSF funds is contingent upon successful completion of reviews under the EFF, he added.
