Pakistan, IMF 'agree' key budget targets for FY2026-27

Pakistan and the International Monetary Fund (IMF) have reportedly concluded negotiations on the federal budget, with both sides reaching an understanding on major fiscal targets and policy measures for the upcoming financial year.

According to sources, the federal budget for FY2026-27 is expected to be close to Rs18 trillion. While discussions on most budgetary matters have been finalised, virtual negotiations between the Federal Board of Revenue (FBR) and the IMF are reportedly continuing on proposals aimed at providing relief to the salaried class.

Sources said the IMF has agreed to reduce the FBR’s tax collection target for the current fiscal year for a second time.

The revised target has reportedly been lowered from Rs13.979 trillion to Rs13.005 trillion. For the next financial year, the government is expected to set an overall tax collection target of approximately Rs15.264 trillion.

The proposed revenue breakdown includes Rs7.413 trillion from direct taxes, Rs4.727 trillion from sales tax, Rs1.651 trillion from customs duties and Rs1.043 trillion through the Federal Excise Duty.

IMF urges Pakistan to expand tax net, improve revenue collection

Meanwhile, the Petroleum Development Levy (PDL) is expected to remain a key source of government revenue. Sources indicate that the target for PDL collections may be increased to Rs1.727 trillion in the next fiscal year, compared with Rs1.468 trillion during the current year.

Non-tax revenue is projected at around Rs2.768 trillion, while gas surcharge collections are expected to contribute approximately Rs151 billion.

On the expenditure side, debt servicing is likely to remain the largest financial burden on the federal government. Total payments towards interest and debt obligations are estimated at Rs7.824 trillion, including Rs6.652 trillion for domestic debt and Rs1.107 trillion for foreign debt repayments.

Sources further suggest that the upcoming budget may introduce new taxation measures worth approximately Rs220 billion to help meet fiscal targets agreed with the IMF.

In addition, revisions to income tax slabs for salaried individuals are reportedly under consideration, with the government exploring options to provide some relief to taxpayers within the formal sector.

The federal budget is expected to be presented in the coming days, providing greater clarity on taxation, spending priorities and economic policy for the next financial year.