World Bank flags risks in Pakistan’s tax reforms

The World Bank has reported moderate progress in Pakistan’s tax reforms and development programmes, while warning of substantial political, governance and economic risks that could affect implementation. The lender has assessed two major financing programmes, worth approximately $770 million combined, as moderately satisfactory or facing moderate-to-substantial risks, according to its latest disclosures.

The programmes aim to strengthen Pakistan’s macroeconomic stability, improve public service delivery, increase domestic revenue collection and expand digital services. One of the main targets is to raise the country’s tax-to-GDP ratio from 12.3 per cent in June 2025 to 15 per cent by June 2030.

The Pakistan Public Resources for Inclusive Development Multiphase Programmatic Approach is backed by a financing framework of around $700 million. The World Bank has rated its overall implementation as moderately satisfactory but assigned it a substantial risk classification. The assessment reflects concerns over political stability, governance, economic conditions, institutional capacity and compliance with financial and environmental standards.

Despite these challenges, the lender has acknowledged progress on several performance indicators linked to the release of funds. It said the reform programme had maintained momentum, while the government was working to put technical assistance arrangements into operation and adjust project activities and budget allocations.

The government and the World Bank are also coordinating efforts to address implementation delays. Their focus includes completing preparatory work, meeting conditions for programme effectiveness and ensuring that pending administrative requirements do not undermine reform objectives.

One significant concern involves delays in establishing the governing council of the Pakistan Bureau of Statistics and appointing a chief statistician. The World Bank has identified these requirements as important conditions for the programme.

According to the lender, the chief statistician’s position must remain filled throughout implementation. The government cannot meet this requirement simply by assigning the responsibilities to an existing official without a formal appointment. The position had remained vacant since September 24, 2026, creating a delay in meeting the programme’s conditions.

The World Bank has also highlighted risks surrounding the $70 million Connected Punjab Programme, which runs until June 2031. The initiative has received a moderate-to-substantial risk rating because of political, governance, macroeconomic and financial management concerns.

However, the lender has recognised strong support for the programme from Punjab’s senior leadership. The Punjab Information Technology Board has also obtained provincial government approval, indicating institutional readiness to move forward with the initiative.

The Connected Punjab Programme is designed to improve broadband access, strengthen digital public services, prepare institutions for artificial intelligence and expand cashless transactions. These measures are intended to improve connectivity and make government services more accessible to citizens.

The next phase will focus on developing an AI Oversight Committee, a data governance framework, a personal data protection strategy and a cybersecurity strategy. These measures are expected to provide safeguards for the responsible use of artificial intelligence and the secure handling of digital information.

The broader federal programme was approved by the World Bank’s board of directors on December 19, 2025. It aims to support reforms at both federal and provincial levels, improve domestic revenue mobilisation and increase the efficiency of public spending.

The latest assessment highlights a mixed picture for Pakistan’s reform agenda. Progress on several implementation targets has encouraged the lender, but persistent governance weaknesses, staffing delays and economic uncertainties remain significant challenges. Sustained coordination between the government and the World Bank will be important for meeting revenue targets and delivering the promised improvements in public services.