The International Monetary Fund (IMF) has urged Pakistan to implement a series of critical fiscal reforms ahead of the next fiscal year’s budget, with a particular focus on simplifying the country’s tax system and enhancing transparency in public finances.
According to IMF documents, the Fund has called on Pakistan to release a comprehensive tax simplification strategy by May 2026. This strategy is expected to streamline the tax structure, reduce complexity, and improve compliance, ultimately supporting sustainable revenue growth.
The IMF has recommended reducing tax exemptions across various sectors, scaling back special tax regimes, and revising heavy withholding and advance taxes. These measures aim to create a more equitable and efficient tax system while minimizing distortions in economic activity caused by excessive exemptions.
In addition, the Fund has advised limiting the Federal Board of Revenue’s (FBR) discretionary powers to make rules, strengthening accountability in its operations, and issuing annual progress reports on the implementation of FBR recommendations. It has also emphasized the need to improve the organizational structure of the FBR to enhance operational efficiency and oversight.
The IMF further suggested reducing the powers of FBR field offices and increasing accountability mechanisms within the institution. These recommendations are intended to curb administrative inefficiencies and ensure that the tax authority operates in a transparent and predictable manner.
To enhance fiscal oversight, the IMF has called for audit findings related to the Petroleum Levy to be published within one year. This step is part of broader efforts to improve transparency and strengthen public trust in Pakistan’s financial management.
Officials note that these reforms are critical to creating a more sustainable fiscal framework, improving revenue collection, and reducing Pakistan’s reliance on external financing. Analysts also highlight that implementing these recommendations could help Pakistan achieve greater efficiency in tax administration, foster investor confidence, and support long-term economic stability.
The IMF’s recommendations underscore the need for timely and effective reform implementation, particularly ahead of the announcement of the FY27 budget. By simplifying the tax system, enhancing FBR accountability, and increasing transparency in revenue collection, Pakistan can lay the foundation for a more robust and resilient economy.
Overall, the Fund’s guidance reflects the importance of structural fiscal reforms to ensure sustainable growth and better governance, emphasizing that comprehensive action is required before the next budget cycle.
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