IMF pushes Pakistan provinces for rs430bn tax increase

ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan’s provincial governments to generate an additional Rs430 billion in tax revenue during the current fiscal year, as part of broader efforts to strengthen public finances and increase provincial own-source revenues.

According to official details, the proposed increase in tax collection is equivalent to 0.3 per cent of Pakistan’s Gross Domestic Product (GDP) and is expected to be shared among the four provinces in line with their allocations under the National Finance Commission (NFC) Award.

The move is aimed at improving fiscal sustainability by encouraging provinces to rely more on locally generated revenues rather than transfers from the federal government. Officials believe stronger provincial tax collection would also help create greater financial discipline and support long-term economic reforms.

Sources said each province would contribute to the additional revenue target based on its respective share under the NFC formula, although specific collection targets for individual provinces have yet to be announced.

The recommendation comes as Pakistan continues implementing economic reforms under its programme with the IMF, with revenue mobilisation remaining one of the key priorities for both the federal and provincial governments.

Meanwhile, the federal government has decided to establish an inter-ministerial committee, to be headed by the prime minister, for the implementation of decisions made by the National Economic Council (NEC).

According to officials, the committee will include federal and provincial ministers along with senior government representatives. It will be responsible for monitoring the execution of national policies, reviewing progress on major development initiatives and ensuring timely implementation of decisions taken by the NEC.

The committee is also expected to strengthen coordination between the federation and the provinces, particularly on economic planning, fiscal reforms and development projects that require close cooperation among different levels of government.

Government sources said improved coordination is considered essential for achieving national economic objectives and ensuring that development programmes are implemented efficiently across the country.

Economists say increasing provincial tax revenues has long been a key recommendation of international financial institutions, which argue that greater fiscal autonomy can improve governance, reduce dependence on federal transfers and create a more balanced financial system.

The IMF’s latest recommendation is likely to shape upcoming provincial budgetary decisions as governments evaluate measures to expand their tax base while balancing the need to protect economic activity. The proposed revenue measures are expected to remain a major focus of fiscal policy discussions in the months ahead.