The federal government is seeking relaxations from the International Monetary Fund to boost economic growth in the 2026-27 budget, aiming to create fiscal space for tax cuts, lower power tariffs, and investment stimulation. Policymakers are considering these measures amid concerns that the IMF’s Extended Fund Facility has slowed growth by raising taxes and increasing electricity and gas tariffs, which have constrained economic activity.
As the government enters the third year of its tenure, it is targeting economic growth of 5 to 6 percent, focusing on investment, job creation, and poverty reduction. Prime Minister Shehbaz Sharif has instructed the Ministry of Finance and the Federal Board of Revenue to collaborate with the business community to attract both domestic and foreign investment. Export-led growth has been highlighted as a key priority to strengthen the economy.
Officials are exploring further reductions in power tariffs to enhance industrial competitiveness and considering tax incentives if sufficient fiscal space is available. Draft proposals include lowering the super tax on the manufacturing sector, increasing the minimum income threshold, raising the 10 percent super tax threshold from Rs 500 million to Rs 1.5 billion, and gradually halving the rate over the next four years.
The government is also looking at measures to ease inflation and reduce the policy rate, which would make borrowing more affordable for businesses. Banks may be assigned specific lending targets to improve credit flows to the private sector, supporting broader economic activity and investment.
