ISLAMABAD: The International Monetary Fund (IMF) has raised serious concerns over Pakistan’s declining tax recovery and warned that limited tax collection remains a major threat to the country’s economic stability. According to the latest IMF report, the Federal Board of Revenue (FBR) must introduce urgent reforms to improve tax collection and expand the national tax net.
The IMF report stated that Pakistan could generate up to Rs2100 billion in additional revenue if sales tax recovery improves by 35 percent. The report highlighted that despite an increase in farm income tax rates in 2025, overall agricultural tax collection remains below expectations.
The global lender stressed the need for mandatory digital invoicing, improved production monitoring systems, and stricter enforcement measures to tackle tax evasion in Pakistan. The IMF also urged authorities to bring more businesses and retailers into the formal tax system through tougher tax registration policies.
According to the report, the agriculture sector contributes around 24.6 percent to Pakistan’s GDP but pays only 0.3 percent in taxes, creating a major imbalance in the taxation system. The IMF further identified the textile, real estate, and business services sectors among the country’s least tax-paying industries.
The report also pointed out that separate GST systems in different provinces have increased complications in tax administration. The IMF recommended better coordination between provinces and the FBR, including the use of FBR data for enforcing agricultural income tax collection.
In addition, the IMF advised the Pakistani government to limit financial transactions for non-filers in the upcoming federal budget to improve documentation of the economy. The institution also stated that a new audit manual and updated FBR audit policy are expected by August 2026.
Despite these concerns, the IMF acknowledged that Pakistan’s economy is showing signs of stability under the ongoing IMF loan programme. The organization projected Pakistan’s economic growth at 3.6 percent for fiscal year 2026, while inflation is expected to average 7.2 percent. The unemployment rate is forecast at 6.9 percent.
