The Federal Board of Revenue (FBR) has collected a total of Rs 7.34 trillion during the first eight months (July to February) of the ongoing fiscal year, but despite this significant amount, the FBR has missed its revenue target by a substantial margin. According to media reports, the revenue collection target for this period was set at Rs 7.95 trillion, leaving the FBR with a shortfall of Rs 604 billion. This shortfall raises concerns about Pakistan’s ability to meet future fiscal targets and complicates ongoing negotiations with the International Monetary Fund (IMF).
The FBR’s shortfall has sparked a wave of concerns as the government approaches critical fiscal discussions with the IMF. For the current fiscal year, the government has agreed upon a target of Rs 9.168 trillion in tax revenue by March 31, 2025. However, in order to meet this target, the FBR will need to collect an additional Rs 1.825 trillion in March 2025, a daunting task considering the impact of Ramadan, holidays, and fewer working days as the country heads into the Eid-ul-Fitr celebrations.
The figures from the FBR’s eight-month revenue collection show that while the tax authority collected Rs 7.343 trillion, it fell short of its target by Rs 604 billion. This underperformance is likely to make it difficult for Pakistan to meet the agreed tax collection goals set for the next fiscal periods, especially with the IMF’s expectations hanging in the balance. The ongoing negotiations with the IMF have added to the pressure, as Pakistan could be forced to either request a downward revision of its tax collection target or to use fiscal space created by reduced debt servicing to keep the fiscal deficit within an acceptable range.
The FBR’s challenges have only become more pronounced in the month of February 2025, when the revenue shortfall grew even larger. The tax authority collected Rs 847 billion in February, falling short of the target of Rs 983 billion. The net revenue collection for the month amounted to Rs 847 billion after issuing Rs 37 billion in refunds, widening the overall fiscal deficit. The gross revenue collected in February stood at Rs 885 billion, but after adjustments for refunds, the FBR could not meet its target, resulting in a Rs 136 billion shortfall.
The breakdown of the FBR’s revenue sources in February reveals some key insights into the shortfall. Income Tax contributed Rs 347 billion, while Sales Tax accounted for Rs 367 billion. Customs duties brought in Rs 106 billion, and Federal Excise Duty (FED) generated Rs 65 billion. This decline in revenue collections, especially when compared to January’s Rs 872 billion, highlights the growing gap in Pakistan’s fiscal targets. The cumulative shortfall from the first seven months of FY25 had already amounted to Rs 468 billion, and with February’s additional Rs 136 billion shortfall, the overall gap is now widening.
As Pakistan’s economic outlook faces increased strain, the pressure on the FBR continues to mount. The government is now in a precarious position, with options narrowing for how to address the shortfall. The IMF’s review mission, scheduled to arrive in Islamabad this weekend, will assess Pakistan’s progress under the $7 billion Extended Fund Facility (EFF). These discussions will be crucial in determining whether Pakistan can meet its fiscal targets, or if the IMF will agree to a revision of the revenue goals.
Additionally, Pakistan has requested an extra $1 billion under the Resilience and Sustainability Facility (RSF), which could potentially raise the total loan amount to $8 billion. However, with the revenue shortfall continuing to rise, the negotiations with the IMF will likely be intense, and the outcome will have significant implications for Pakistan’s economic stability in the months to come.
As the deadline for the fiscal year approaches, the government and the FBR face a critical challenge: finding ways to bridge the growing revenue gap and secure necessary support from the IMF to maintain fiscal discipline and support the country’s economic recovery.