IMF rejects Pakistan’s request to reduce taxes

The International Monetary Fund (IMF) has decided to reject the Federal Board of Revenue’s (FBR) proposal to slash a plethora of taxes. As per credible reports, authorities from Pakistan had requested for a reduction in taxes pertaining to the sale of tobacco and beverages.

Moreover, the Pakistani side had also asked the international lender for permission to cut property transaction taxes. However, the IMF has officially rejected this request, given the current state of the economy.

Previously, authorities had suggested that the international creditor would not oppose the suggested two percent reduction in withholding tax on property buyers. Had this been the case, the volume of property-related transactions could have increased sharply from April 1, 2025 - as formal approval would have been received by this date.

However, the IMF has ensured that no such approval will be extended to Pakistan. Mahir Binci, The IMF’s Resident Cheif (Pakistan), dispelled rumours surrounding reductions in taxes and assured that the tax collection target will not be subject to any downward revisions.

Some believe that cash-strapped Pakistan is losing the right to freely exercise its own fiscal policy. While analysts may assert this to be true, Pakistan’s suboptimal macroeconomic situation leaves little room for disagreement with the IMF.

According to reports, a Staff Level Agreement (SLA) may be reached soon at the conclusion of Pakistan-IMF negotiations. However, the federal government and local authorities will have to guarantee that the country follows the economic roadmap laid out by the IMF.

Of the aforementioned guarantees, the federal government will have to ensure that provincial governments cease their minimum support price (MSP) purchasing of wheat. Recent reports revealed the IMF’s distaste for such policies given their tendency to strain fiscal budgets - a phenomenon which a country following austerity measures cannot afford.

While the international lender is imposing stringent restrictions on Islamabad’s use of fiscal policy, reports indicate that the IMF wants to inject even more funds into the economy. The IMF wishes to expand the scope of the existing $7 billion Extended Fund Facility (EFF) program by signing Pakistan onto the Resilience and Sustainability Facility (RSF) program.

Reports indicate that the RSF program could unlock a whopping $1 billion for Pakistan. Islamabad can mobilise these funds in its fight against climate change by authorising and funding initiatives that boost the country’s resilience to disasters.