Govt prepares plan to introduce new taxation, cut expenditure

Pakistan has prepared a comprehensive plan to introduce additional taxation and cut expenditure in order to meet its revenue targets for the ongoing fiscal year, according to an IMF-related report cited on Thursday.

Officials say the government is ready to adopt further tax measures and reduce spending to address a looming shortfall, with the aim of achieving the tax collection target by December 2025. The plan has been formulated amid concerns that the Federal Board of Revenue’s (FBR) tax collection is likely to decline, the report states.

According to the report, the government’s proposed measures include:

1) A 5% increase in excise duty on fertilizers and pesticides

2) A new tax on high-value sugar-based items

3) The imposition of an 18% sales tax on several specified goods

These steps are part of what officials describe as a contingency strategy designed to avoid the need for a disruptive mini-budget later in the fiscal year.

Alongside new revenue measures, Pakistan also plans to curtail expenditure to counterbalance lower-than-expected revenues. The overall effort is aligned with the country’s longer-term commitment to push the tax-to-GDP ratio to 15%, a key structural objective frequently highlighted in IMF engagements.

Economists warn that while the proposed measures may help stabilise revenues in the short term, they could also fuel inflation if not calibrated carefully.

The developments come as Islamabad continues its discussions with the IMF, with policymakers emphasising the need to maintain fiscal discipline while protecting vulnerable segments of the population.

Reporter: Waqas Azeem