Pakistan Plans Mini-Budget with New Taxes, Spending Cuts to Meet IMF Conditions

Pakistan is expected to introduce a mini-budget ahead of the next federal budget as the government moves to implement additional taxation measures and expenditure cuts to meet revenue targets and address a widening financing gap, according to reports.

The proposed plan includes a five percent increase in excise duty on fertilisers and pesticides, along with the introduction of new taxes on high-value sugar products. Pakistan has also assured the International Monetary Fund that it will impose an 18 percent sales tax on several specified items as part of efforts to generate additional revenue.

The IMF report indicates that the government intends to reduce public spending to offset revenue shortfalls, as the Federal Board of Revenue is likely to miss its tax collection target. The IMF has noted that Pakistan aims to raise its tax-to-GDP ratio to 15 percent while working to bridge a financing gap of around four billion dollars during the current fiscal year.

Under the existing IMF programme, Pakistan is expected to receive two billion dollars in instalments, while an additional one billion dollars may be secured through the Saudi oil facility. The report also states that Pakistan could obtain budgetary support of 504 million dollars from the Asian Development Bank, 500 million dollars from the World Bank Group, and 250 million dollars through the issuance of an international bond.

To address the revenue gap, Pakistan has committed to taxing fertilisers, pesticides, and surgical items, with new tax measures and additional conditions incorporated into the Memorandum of Economic and Financial Policies for the upcoming IMF tranche.