IMF sets Rs17.1tr federal revenue target for 2026-27 – Business

The International Monetary Fund (IMF) has set a rigorous federal revenue target of Rs17.145 trillion for Pakistan for the 2026-27 fiscal year. This target, which represents a 13.5% increase—or over Rs2.03 trillion—compared to the current fiscal year, comes alongside a series of stringent administrative and policy mandates that the Pakistani government must commit to before the federal and provincial budgets are passed by parliament.

These requirements were detailed in the IMF’s staff report following the completion of the third review of the $7 billion Extended Fund Facility (EFF) and the second review of the $1.4 billion Resilience and Sustainability Facility (RSF). To secure the disbursement of $1.3 billion under these facilities, Pakistan had to deliver three critical prior actions: reducing grants to provinces by Rs136 billion, recovering Rs322 billion following court decisions on the “super tax,” and implementing the full pass-on of fuel prices.

Federal Revenue and FBR Targets for FY27

A significant portion of the revenue burden falls on the Federal Board of Revenue (FBR), which has a projected collection target of Rs15.264 trillion for FY27. This is an increase of approximately 13.7% (Rs1.836 trillion) over the current year. The IMF has further broken this down with a half-year target of Rs7.022 trillion ending in December 2026.

The IMF’s projections are based on an estimated economic growth rate of 3.5% and average inflation of 8.4%. To bridge the gap between organic growth and the total target, the fund is pushing for several enforcement and reform measures:

• Tax Audits: The government has committed to generating approximately Rs95 billion through audits in FY27.
• Sales Tax Improvements: Rs50 billion is expected from the monitoring and improved calculation of sales tax liabilities.
• Sector-Specific Recoveries: An additional Rs50 billion is targeted from the sugar, cement, tobacco, and fertilizer sectors.

Petroleum Levy and Energy Reforms

One of the most impactful measures is the proposed 18% hike in the petroleum levy target. The IMF has set the petroleum levy target for FY27 at Rs1.73 trillion, up from the Rs1.468 trillion target for the current year (which is expected to be surpassed by nearly Rs80 billion to reach Rs1.55 trillion). This suggests an understanding between the government and the IMF to potentially raise the average levy rate to Rs100 per litre.

In the energy sector, the government has committed to timely tariff adjustments for gas and power to ensure full cost recovery. To protect the poor, tariff subsidies for low-income categories will no longer be handled through the billing mechanism but will instead be provided via the Benazir Income Support Programme (BISP), based on National Socioeconomic Registry (NSER) surveys.

Provincial Mobilization and Social Safety Nets

The IMF is not only targeting federal coffers but has also asked provinces to mobilize an additional Rs430 billion. This would bring total provincial revenues to Rs1.95 trillion in FY27, up from the Rs1.264 trillion expected in FY26. Provinces intend to achieve this through better collection of agricultural income tax and general sales tax on services.

To balance these austerity measures, the IMF and the government have agreed to increase BISP payments from the current Rs14,500 per family to Rs18,000. This is particularly critical as authorities maintain that 40% of the population is currently facing vulnerability, beyond those already living in absolute poverty.

Structural Reforms and Governance

Beyond the numbers, the IMF is demanding deep structural changes to the Pakistani economy. The government has committed to several deadlines to improve transparency and efficiency:

• Market Intervention: A national sugar policy must be adopted by the end of June 2026 to exit commodity operations at federal and provincial levels. Similarly, the government must reduce intervention in wheat markets to support private investment.
• Automobile Policy: A new automobile policy must be cleared by the IMF before cabinet approval by the end of June 2026.
• Anti-Corruption: The autonomy of the National Accountability Bureau (NAB) must be legislated by January 2027, and 10 corruption-prone institutions must be identified for audit by the end of this year.
• Digitalization: All federal and provincial government payments must be digitalized by June 2027.
• Investment Incentives: The government has pledged not to introduce new incentives for special economic, export processing, or technology zones, and will phase out existing ones by 2035.

External Financing and Future Outlook

The IMF estimates Pakistan’s external financing needs for the coming year at $21.2 billion. Available financing from multilateral, bilateral, and capital market lenders is projected to cover these needs, with estimates placed at $21.9 billion.

As an IMF staff mission remains in Pakistan to fine-tune these proposals, the government faces the challenge of balancing these aggressive revenue targets and structural reforms with the economic reality of a vulnerable population. The final budget for 2026-27 is expected to be presented to the cabinet and parliament early next month.