ISLAMABAD: Pakistan is gearing up to introduce wide-ranging tax reforms and withdraw key exemptions to generate nearly Rs350 billion in additional revenue in the upcoming 2026–27 federal budget, in line with commitments made under its programme with the International Monetary Fund.
The proposed measures are expected to play a central role in achieving fiscal targets, as policymakers intensify efforts to implement structural reforms agreed with the IMF.
Officials familiar with the discussions say the government is focusing on phasing out long-standing tax concessions across multiple sectors that have significantly weakened the national revenue base.
Sources indicate that if the Rs350 billion target is not fully met through the elimination of exemptions, authorities may introduce fresh taxation measures to bridge the shortfall.
One of the key areas under consideration is the removal or revision of import-related tax concessions listed in the 12th Schedule of the Income Tax Ordinance, 2001.
Proposals reviewed by the Ministry of Finance’s tax policy wing include either abolishing these exemptions altogether or increasing tax rates on selected imports to enhance revenue collection.
Pakistan is currently operating under a 37-month Extended Fund Facility (EFF) and a 28-month Resilience and Sustainability Facility (RSF) supported by the IMF.
The lender has consistently urged the government to broaden the tax base, curtail exemptions, and enforce fiscal discipline to ensure long-term economic stability.
In its statement issued on March 11, 2026, the IMF noted “considerable progress” in ongoing programme reviews with Pakistani authorities, while highlighting the need for continued policy adjustments in response to global economic risks.
The IMF also acknowledged improvements in fiscal consolidation, tighter monetary policy to control inflation, and ongoing energy sector reforms.
However, it stressed that deeper structural changes remain essential to sustain economic growth while safeguarding social spending on health, education, and welfare programmes.
The government maintains that IMF-backed reforms are necessary to stabilise public finances, though such measures often face pushback from businesses and political stakeholders due to rising costs, inflationary pressures, and increased compliance requirements.
