ISLAMABAD: Pakistan is preparing to introduce a mini-budget ahead of the next federal budget as part of efforts to meet revenue targets and close a widening financing gap. The move is expected to bring several new taxes on essential and high-value goods, along with spending cuts, as the government works to stay on track under its ongoing agreement with the International Monetary Fund.
Sources cited in the report say the government has assured the IMF that it will take additional revenue measures, including the imposition of an 18 percent sales tax on selected items. Among the key proposals is a 5 percent increase in federal excise duty on fertilisers and agricultural pesticides, a step that could have implications for the farming sector and food prices. Taxes are also expected to be introduced on high-value sugar products, as part of a broader plan to expand the tax base.
The IMF has acknowledged that Pakistan’s Federal Board of Revenue is likely to fall short of its tax collection targets, prompting the need for further taxation and expenditure rationalisation. Pakistan has committed to raising its tax-to-GDP ratio to 15 percent, a long-standing goal aimed at strengthening fiscal sustainability. At the same time, the country faces a financing gap of approximately 4 billion dollars during the current fiscal year.
To bridge this gap, Pakistan is expected to receive around 2 billion dollars in instalments under the existing IMF programme, along with a possible 1 billion dollars through the Saudi oil facility. Additional external financing may include about 504 million dollars in budgetary support from the Asian Development Bank, 500 million dollars from the World Bank Group and 250 million dollars through the issuance of an international bond.
The report says that new tax measures and additional conditions have been incorporated into the Memorandum of Economic and Financial Policies for the next IMF tranche. These include taxes on fertilisers, pesticides and surgical items, as well as a commitment to fully deregulate the sugar sector. The IMF has also set an August 2026 deadline for amendments to the State-Owned Enterprises law to improve governance and reduce fiscal risks.
On the administrative side, Pakistan plans to expand documentation of the economy by installing point-of-sale systems in 40,000 major retail outlets nationwide over the next two years. Tax compliance has shown improvement, with 5.2 million returns filed in FY2024 and 7 million in FY2025. The government has also pledged to harmonise sales tax across all four provinces to reduce inconsistencies.
Development spending will be tightly controlled, with only 10 percent of the Public Sector Development Programme allocated to new projects, while ongoing schemes worth around Rs2.5 trillion will be prioritised. Greater emphasis will be placed on climate-related initiatives, and public procurement transparency will be enhanced through the e-PADS system.
Social protection remains part of the reform agenda. From January 2026, quarterly payments under the Benazir Income Support Programme’s Kafalat scheme will rise to Rs14,500, with beneficiaries increasing to 10.2 million. Biometric verification and e-wallet payments are expected to be rolled out by June, as Pakistan balances fiscal tightening with targeted social support.
