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Pakistan’s economic plan: Miss, apologize, repeat

Pakistan missed 3 of 5 IMF targets ahead of a September review, with tax underperformance and provincial overspending offset by a record primary surplus. What it means for the next tranche.

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By MoneyOval Bureau

3 min read

Pakistan’s economic plan: Miss, apologize, repeat

Pakistan has slipped on key promises again. With the second IMF review approaching, Islamabad missed three of five performance targets, reviving doubts about delivery as financing pressures build into the fall.

Officials highlighted a record primary surplus and a narrower fiscal deficit, but the misses on revenue and savings have taken center stage. Markets and lenders now parse whether the positives can outweigh the structural gaps at the next check-in.

What Pakistan missed and why it matters

The Federal Board of Revenue fell short on total collections, underscoring persistent tax base weaknesses and uneven enforcement. A lack of sustained compliance drives left projected gains on paper rather than in coffers.

Provincial governments also missed their aggregate savings target amid higher expenditures. The slippage complicates federal consolidation and signals coordination challenges across tiers of government.

Did you know?
Pakistan posted a primary budget surplus of roughly 2.7 trillion rupees, its highest in more than two decades, even as it missed several IMF performance benchmarks.

Tajir Dost: a retail tax plan that fizzled

The much-publicized Tajir Dost Scheme, aimed at bringing retailers into the net, generated negligible revenue against a 50 billion rupee goal. Design flaws, limited buy-in, and weak execution blunted impact despite early promotion.

Revival would require simplified filings, credible enforcement, and incentives that make formalization worthwhile. Without traction among small traders, broader tax efforts risk stalling again.

The bright spot: surplus and deficit metrics

Pakistan recorded a primary surplus near 2.7 trillion rupees, the strongest in roughly 24 years, while the overall fiscal deficit eased to about 5.4% of GDP, below target. These gains offer some cushion heading into the review.

Still, surplus optics cannot substitute for missed structural targets. The IMF will focus on durable, recurring revenue and disciplined spending, not one-off boosts or accounting improvements.

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What the IMF will likely probe next

Expect scrutiny of tax administration, documentation trails, and compliance rates behind headline targets. Provincial budgeting and expenditure controls will be tested for credibility and repeatability.

The program’s expanded conditionality raises the bar for timely corrections. Clear remedial steps on revenue and savings will be key to unlocking the next tranche.

External pressures and the funding clock

With sizeable external debt repayments due this fiscal year, program momentum is relevant for rollover confidence. Any delay or dilution in reforms could tighten liquidity and increase the cost of bridging finance.

Evidence of closing shortfalls, not just acknowledging them, is crucial for successful review outcomes. Lenders will look for verifiable actions that improve cash flow and reduce risk.

What would fix the revenue problem now

Targeted enforcement in high-yield sectors, digitized invoicing, and real-time data matching can raise collections faster than broad-brush rate hikes. Predictable audits and lower compliance friction can pull more firms into the net.

For retailers, streamlined registration, fixed-slab options, and payment integration could nudge formalization. Pairing carrots with credible penalties is critical to shift behavior.

The provincial piece of the puzzle

Anchoring provincial savings calls for binding compacts linked to transfers and transparent reporting. Medium-term ceilings, quarterly checkpoints, and outcome-based incentives can align spending patterns with federal consolidation.

Without provincial alignment, federal gains risk being offset, weakening the overall program narrative at each review.

The road ahead

The next few weeks will be about credibility. If Islamabad demonstrates enforceable fixes on revenue and provincial savings, the record surplus can support a favorable review.

If not, the pattern of miss, apologize, repeat will persist, raising funding costs and narrowing the space for growth-friendly reforms just when they are most needed.

What’s the most urgent fix before the IMF’s September review?

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