Finance Minister (FinMin) Muhammad Aurangzeb has said that the IMF (International Monetary Fund) has expressed deep satisfaction over the fiscal performance of both the provinces and the Centre during the current fiscal year.

The federal government also pressed provinces to raise their revenue contribution by at least Rs400 billion, nearly 40 percent above their current share, in the coming fiscal year.

Aurangzeb conveyed the IMF’s position at a consultative meeting with provincial finance ministers, where he spoke via video link.

A senior Ministry of Finance official who attended the meeting told a private media outlet that the IMF mission currently in Islamabad expected provinces to maintain fiscal discipline for the remainder of the current year and deliver stronger numbers next year.

The IMF staff mission, led by mission chief Iva Petrova, has been in Islamabad since May 13 to finalise next year’s budget targets and collection strategies in consultation with government authorities.

The two major revenue-generating provinces- Punjab and Sindh- were asked to improve their contribution by around 40 percent compared to this year.

With Balochistan and Khyber Pakhtunkhwa (KP) facing security and governance challenges that limit their revenue potential, the burden of generating at least Rs400bn in additional revenue falls largely on the two larger provinces.

Sindh was told that considerably more needed to be done in the property tax sector, while Punjab’s Agricultural Income Tax (AIT) collection was flagged as far below its potential.

Aurangzeb told all provinces that AIT collections needed expansion.

IMF has asked the Centre to introduce at least Rs430bn in additional budgetary measures in the upcoming budget, alongside a nearly equal Rs430bn to be generated by the four provinces.

This would push total provincial revenues to Rs1.95 trillion next year, up from Rs1.264 trillion expected this year. Provinces are expected to achieve this through improved GST collection on services and agricultural income tax and would then provide a cash surplus equivalent to 1.4 percent of GDP to the Centre nearly Rs2 trillion, compared to Rs1.46 trillion projected for the current year.

The FBR’s revenue target for next year has been set at Rs15.264 trillion, around 13.7 percent or Rs1.836 trillion higher than the current year’s target.

The IMF expects roughly 12 percent organic revenue growth, factoring in 8.4 percent average inflation and 3.5 percent economic growth, with the remainder to come through budgetary, administrative and digital reforms.

Provincial development budgets are estimated at Rs2.5 trillion next year, against Rs2.1 trillion in the current fiscal year.

In the first three quarters, the four provinces jointly delivered a cash surplus of Rs1.636 trillion to the Centre Rs172bn above the Rs1.464 trillion target set for the entire year under the IMF programme.

Punjab led with an Rs824bn surplus, followed by Sindh at Rs441bn. KP posted Rs253bn while Balochistan contributed Rs118bn. Both Punjab and Sindh had kept spending under their Annual Development Programmes in check.

During the same period last year, provinces had fallen short producing a Rs1.053 trillion surplus against an annual target of Rs1.2 trillion.