IMF seeks answers over Rs853bn fiscal gap

Pakistan has assured the International Monetary Fund (IMF) that it will provide additional details to explain an Rs853 billion discrepancy in government financial accounts. The issue came under discussion during the IMF mission’s meetings with Pakistani officials on budget data, provincial finances, tax collection and federal revenues.

Of the total discrepancy recorded for the 2025-26 fiscal year, around Rs448 billion relates to federal government accounts. Officials told the IMF that the mismatch was largely linked to provincial investments in treasury papers, differences between cash withdrawals and actual expenditures, and payments made after the close of the financial year.

Punjab reported a discrepancy of around Rs266 billion. Officials from the provincial Finance Department attributed the gap mainly to transactions involving commercial accounts and differences between inflows and outflows during the year.

The Punjab government also pointed to differences in accounting practices between the federal and provincial governments. Delays in releasing development funds toward the end of June were another factor. According to officials, cheques are sometimes issued before June 30, while the actual cash is withdrawn after the financial year ends.

Sources said the incomplete implementation of the Treasury Single Account system was also contributing to discrepancies. Several government departments and public bodies have yet to transfer their funds into the central account.

The Finance Ministry has assured the IMF that it will provide further information on the matter. Officials said the discrepancy was not expected to affect the government’s reported primary budget surplus of 2.9% of GDP.

The IMF mission also examined Pakistan’s weak agriculture income tax collection. Provincial authorities increased the tax rate from 15% to 45%, bringing it in line with the rate applied to business income. However, collections remained significantly below targets.

In Sindh, the agriculture income tax target was Rs2 billion last fiscal year, but the province collected only Rs1.1 billion. Its target for the current fiscal year has been increased to Rs6 billion, although officials expect a shortfall of at least Rs3 billion.

Punjab also fell short of its target. Against a previous target of Rs10.5 billion, the province collected around Rs4 billion. Its agriculture income tax target for the current fiscal year stands at Rs12.5 billion.

Officials also briefed the IMF on efforts to improve coordination between the Federal Board of Revenue (FBR) and provincial tax authorities. Under an agreement with Sindh, the FBR has shared information on agriculture income declared in tax returns. Data for 44,350 taxpayers reporting agricultural income for tax year 2025 was provided.

Sindh has called for real-time data connectivity with the FBR to improve monitoring and collection. The province has shifted agriculture income tax administration from the Board of Revenue to the Sindh Revenue Board and introduced digital registration and filing systems.

The IMF also questioned the FBR about its tax collection performance. The FBR missed its revised target for the previous fiscal year by Rs929 billion. Officials, however, assured the Fund that key performance indicators, including digital invoicing and production-line monitoring, would be achieved.

The FBR also expressed confidence that its first-quarter collection target of Rs3 trillion would be met. However, officials remained cautious about committing to the full-year target of Rs15.263 trillion, saying the outcome would depend partly on regional security developments and their economic impact.

The IMF further discussed the limited response to the government’s second fixed-tax scheme for traders. Officials said the scheme was intended to give traders another opportunity to comply before stricter enforcement measures and penalties are introduced.