ISLAMABAD: The International Monetary Fund has raised questions over Pakistan’s collection of agricultural income tax and the Federal Board of Revenue’s (FBR) ability to meet its tax targets, according to sources familiar with the discussions.
Pakistan and the IMF formally began talks on Tuesday for the fourth review of a $7 billion loan programme and the third review of a separate $1.4 billion climate facility, with Islamabad seeking about $1.2 billion in fresh disbursements.
Finance Minister Muhammad Aurangzeb held a kick-off meeting with an IMF mission led by Iva Petrova, the finance ministry said.
Pakistan has increased the agricultural income tax rate to 45 per cent from 15 per cent, but provinces failed to meet their collection targets for the last fiscal year, the sources said.
Sindh collected Rs1.1 billion against a target of Rs2 billion in the last fiscal year, while Punjab collected Rs4 billion against a target of Rs10.5 billion, they said.
Sindh has set an agricultural income tax collection target of Rs6 billion for the current fiscal year, while Punjab’s target is Rs12.5 billion.
The sources said there were concerns that Sindh’s collection could fall at least Rs3 billion short of its target this fiscal year.
The IMF also questioned the FBR over its failure to meet its tax collection target last fiscal year, when the tax authority fell Rs929 billion short of its revised target, the sources said.
The FBR assured the IMF that it would meet key targets including digital invoicing and monitoring of production lines, and also expressed confidence that it would achieve its first-quarter tax collection target of Rs7 trillion, according to the sources.
The tax authority, however, did not give a final assurance that it would meet its full-year target of Rs15.263 trillion, they said, citing regional security conditions as a potential risk to revenue collection.
The IMF also expressed concern over a low response from traders to the government’s second fixed-tax scheme, the sources said.
The government told the IMF it wanted to give traders a final opportunity to comply before resorting to penalties and a crackdown, according to the sources.
Agricultural tax
The FBR provided data on 44,350 individuals who declared agricultural income in tax year 2025, the sources said.
Sindh has stressed the need for real-time data sharing between the FBR and the Sindh Revenue Board to improve agricultural income tax collection.
The administration of agricultural income tax in Sindh has also been transferred from the Board of Revenue to the Sindh Revenue Board, according to the sources.
The province has completed 3,650 registrations through digital registration and return filing, while 1,912 agricultural income tax returns have been filed, they said.
The IMF’s questions come as Pakistan seeks to broaden its tax base and improve revenue collection under its economic reform programme with the Fund.
The latest IMF review is assessing Pakistan’s progress on revenue mobilisation and other fiscal and structural targets, with the government seeking to demonstrate that it remains on track to meet commitments under the programme.
The IMF mission arrived in Islamabad on September 23 and has held discussions with officials from the State Bank of Pakistan, finance ministry, the Federal Board of Revenue, the Establishment Division and the finance departments of Punjab and Khyber Pakhtunkhwa, according to officials and local media reports.
The review covers Pakistan’s progress under the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF).
Successful completion of the reviews could unlock about $1 billion under the EFF and $200 million under the RSF, although the disbursements would remain subject to approval by the IMF’s executive board.
Aurangzeb briefed the IMF team on recent macroeconomic indicators, improvements in Pakistan’s credit rating and the investment climate, the finance ministry said.
The discussions come as Pakistan faces pressure to meet revenue targets and complete several outstanding structural reforms under the IMF programme.
Sources said that revenue collection and the economic impact of the conflict in the region were among the issues discussed in the initial meetings. Disruptions linked to the conflict and the resulting increase in fuel prices have affected economic activity and tax collection.
The Federal Board of Revenue has told the IMF it expects to meet its first-quarter tax collection target of 3.053 trillion rupees by the end of September, despite the pressure on revenues
Structural benchmarks
One of the key outstanding issues is legislation governing Pakistan’s sovereign wealth fund.
The government missed an end-March deadline to amend the Sovereign Wealth Fund Act to strengthen governance mechanisms and safeguards covering seven state-owned enterprises.
The companies include Oil and Gas Development Company Ltd, Pakistan Petroleum Ltd, Mari Petroleum, National Bank of Pakistan, Government Holdings, Pakistan Development Fund and the Neelum-Jhelum Hydropower project.
The assets covered by the proposed amendments are worth about $8 billion, which said the amendments were still awaiting parliamentary approval.
The government has also taken steps on public procurement reforms ahead of the IMF review.
It notified new Public Procurement Rules 2026 on Monday, introducing mandatory use of the E-Pak Acquisition and Disposal System for federal procurement, along with measures covering competition, conflicts of interest, blacklisting and grievance redressal.
The IMF had earlier raised concerns over preferential treatment for state-owned enterprises under rules allowing direct contracting with them in certain circumstances.
The IMF is also expected to assess Pakistan’s progress on tax reforms, fiscal consolidation, state-owned enterprises, the energy sector and other structural measures agreed under the programme.
The government is seeking to demonstrate that it remains on track with the IMF programme despite the economic impact of regional instability.
Pakistan has previously received waivers for some missed targets under its IMF programme, while authorities have sought flexibility over reforms affected by circumstances beyond their control.
The current EFF was approved by the IMF Executive Board in September 2024 as a 37-month programme worth about $7 billion.
The RSF, designed to help countries build resilience against climate-related and other external shocks, was approved for Pakistan in March 2025 and is worth about $1.4 billion.
Pakistan’s latest review is expected to continue for several weeks before the IMF mission and authorities can reach a staff-level agreement. Any agreement would then have to be approved by the IMF’s executive board before the funds are released.
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