• Proposes Rs430bn new budgetary measures
• Suggests 18pc hike in petroleum levy target
• Asks provinces to mobilize extra Rs430bn
• Links power tariff relief to BISP
• Sees economic growth at 3.5pc
• Estimates average inflation at 8.4pc
• Seeks hike in BISP payment to Rs18,000 with 40pc population vulnerable
ISLAMABAD: With Rs430 billion in new budgetary measures and an 18 percent higher petroleum levy, the International Monetary Fund (IMF) has targeted Pakistan’s federal revenues at Rs17.145 trillion for 2026-27, along with a series of administrative and policy measures committed by the government for the federal and provincial budgets to be passed by the parliament.
In its staff report On completion of third review of $7bn Extended Fund Facility (EFF) and second review of $1.4bn Resilience and Sustainability Facility (RSF), the fund has projected total federal revenues for FY27 at Rs17.144tr — over Rs2.03tr higher than the current fiscal year, up 13.5pc.
The report showed that Pakistan had to commit and deliver three major prior actions to make up for slippages on program benchmarks before the IMF’s executive board finally approved the disbursement of $1.3bn under both facilities. These included Rs136bn lower grants to the provinces, Rs322bn in recoveries following favorable court decisions relating to super tax, and full pass-on of fuel prices after the government’s initial hesitation following the US-Iran war.
This was despite the fact that authorities maintained that, besides those living in absolute poverty and getting social income supports, 40pc of the population was now facing vulnerability. The BISP support would be increased to Rs18,000 in the coming budget, up from Rs14,500 per family at present, the two sides have agreed.
Almost matching commitments worth Rs430bn have been made by the four provinces for additional provincial revenue mobilization next year. This will take total provincial revenues to Rs1.95tr next year, up from Rs1.264tr expected in FY26. The provinces have committed to deliver these targets through improved collection from general sales tax on services and agricultural income tax. They would then surrender 1.4pc of GDP-equivalent cash surplus — 0.3pc higher than in FY26 — to the Centre. This would work out to be close to Rs2tr against Rs1.46tr provincial surplus in the current year.
The collection target for the Federal Board of Revenue (FBR) has been projected at Rs15.264tr for FY27, about 13.7pc or Rs1.836tr higher than the current fiscal year. Under this annual projection, FBR’s half-year target ending December 2026 has been separately set at Rs7.022tr. This means the IMF expects about 12pc organic revenue growth, based on its estimate of 8.4pc average inflation and 3.5pc economic growth, with the remainder coming from budgetary, administrative, and digital reforms and enforcement measures.
This would be supported by about Rs95bn committed by the government to generate through tax audits in FY27, Rs50bn through monitoring and improved calculation of liabilities in sales tax and about Rs50bn improved recoveries in tax gap from sugar, cement, tobacco and fertilizer sectors.
The fund has projected the Rs1.468tr petroleum levy target for the current fiscal year to be surpassed by almost Rs80bn to Rs1.55tr. It has set Rs1.73tr petroleum levy target for FY27 — 18pc higher than budgeted for FY26. That means the government and the fund have already reached an understanding to perhaps raise the average levy rate to Rs100 per liter for next year, as the country has never had such high consumption growth.
An IMF staff mission is currently in Pakistan to fine-tune budgetary proposals around these estimates before the budget 2026-27 is presented to the cabinet and the parliament early next month.
Defense expenditure is estimated to be Rs100bn higher next year at Rs2.665tr compared to Rs2.564tr this year. The Public Sector Development Program for next year is projected at Rs986bn compared to Rs873bn in the current year, notwithstanding major announcements by the government in the budget. Provincial development budgets are estimated at Rs2.5tr next year compared to Rs2.1tr in the current fiscal year. Interest payments for FY27 are projected at Rs7.8tr, up from Rs7.3tr this year.
The IMF has estimated the next year’s external financing needs at $21.2bn and projects available financing at $21.9tr from bilateral, multilateral and capital market lenders.
As part of next year’s budget, Pakistan has also committed to increasing the combined expenditure of the federal and provincial governments by 0.2pc of GDP to a total of Rs4.227tr, and to digitalising all federal and provincial government payments by June 2027.
Another commitment pertains to timely tariff adjustments according to their biannual and annual schedules, respectively, in the gas and power sectors, to ensure full cost recovery in the wake of the regional security crisis and supply disruptions. As a result, tariff subsidies for low-income categories would be provided through BISP, based on the national socioeconomic registry (NSER) surveys, rather than the current billing mechanism.
As a result, power sector subsidies have been capped at Rs830bn, or 0.6pc of GDP, for next year, more than Rs200bn lower than the Rs1.036tr in FY26. The government has also committed to settling disputes with K-Electric by September this year and to reducing circular debt flow by Rs300bn to ensure net zero flow at the close of FY26 and FY27.
The government has also committed to adopting a national sugar policy by the end of June 2026 to fully exit commodity operations at both the federal and provincial levels. The new automobile policy would be cleared from the IMF before its approval by the federal cabinet by the end of June, and the National Accountability Bureau’s autonomy would be legislated by the end of January 2027. The government will identify 10 top corruption-prone institutions by the end of this year for detailed analysis and audit. The provincial anti-corruption agencies would also be strengthened.
The government has also given an undertaking not to introduce new incentives for special economic zones, export processing zones, and special technology zones, and to phase out all such incentives by 2035 to provide a level playing field for all.
The government has also committed to reducing government intervention in the wheat and sugar markets to remove distortions and support private investment, productivity, and efficiency. These changes will also strengthen price discovery, which is particularly important amid elevated international food price volatility.
Governance arrangements for strategic wheat reserves would be improved by conducting procurement through the private sector at prices aligned with international markets and by limiting releases to cases of a declared emergency.
Published in Dawn, May 16th, 2026
