Pakistan Awaits IMF Approval on Tax Measures and Relief Package for FY2026-27 Budget

ISLAMABAD: The federal government is awaiting approval from the International Monetary Fund (IMF) on a series of proposed tax measures and relief initiatives before finalizing the federal budget for fiscal year 2026-27.

According to official sources, the government has proposed reducing tax slabs for salaried individuals, cutting the super tax rate by 2 percent, abolishing the 1 percent advance income tax on exporters, and providing substantial relief to the property sector.

At the same time, discussions are continuing on increasing the General Sales Tax (GST) on solar panels, hybrid vehicles, and nearly two dozen other items to the standard rate of 18 percent.

Pakistan has also requested the IMF to allow a lower GST rate on electric vehicles, arguing that such incentives are necessary to promote environmentally friendly transportation and energy conservation.

The proposal has been presented under the IMF’s $1.4 billion Resilience and Sustainability Facility (RSF), which aims to support climate resilience and energy security initiatives.

Senior government officials told local media that achieving next year’s revenue targets is becoming increasingly challenging. After revising the Federal Board of Revenue’s (FBR) tax collection target for the current fiscal year ending June 30, 2026, to Rs13.428 trillion, the government is now working with the IMF to set a significantly higher target of Rs15.264 trillion for FY2026-27.

Officials said balancing revenue generation with tax relief measures remains a major challenge, particularly as the government seeks to stimulate economic activity while meeting IMF-backed fiscal commitments.

The final shape of the budget, including tax rates and relief measures, is expected to depend on the outcome of ongoing negotiations between Pakistan and the IMF.