• The Economic downturn may result in imposing additional taxes in the coming weeks.

• Business Community Upset as the Economic Impact may Worsen in the Coming Weeks.

PTI Protest Jeopardizes IMF Programme as the Government seems unable to achieve the tax targets. IMF had approved a 3 years Extended Fund Facility in September 2024. The $7 Billion IMF Loan to Pakistan held several conditions on tax reforms and collection. One of the requirements was including agriculture sector in the taxation system at par with salary class and other business sectors. For this, the government made required constitutional changes and the provincial governments came up with reforming their own legal frameworks.

Recently, an IMF Mission visited Pakistan from November 12 to 15, 2024. The Mission’s visit shows IMF is closely following Pakistan’s economic activities and it also recommended to use untapped resources for economic productivity. “Strong program implementation can create a more prosperous and more inclusive Pakistan, improving living standards for all Pakistanis,” the mission chief was quoted as saying.

While the economic turnaround was taking place with Pakistan Stock Exchange nearing the milestone of 100,000 points on November 25, 2024. The Pakistan Tehreek-i-Insaf began its protest on November 24, 2024. The protesters are demanding an immediate release of their leader Mr. Imran Khan and other party workers. Moreover, they are demanding reversal of the 26th Constitutional Amendment. Additionally, they are demanding a change in the government. While the protest continues in Islamabad, the economic impact is yet to be seen.

Tax Collection Target for FBR

The IMF Programme is linked to stringent tax collection process for the government. Therefore, the FBR is assigned with monthly, quarterly and annual targets to achieve the required taxes for FY2025. The FBR collected PKR 3,440 billion during the first four months of FY25 against the assigned target of PKR 3,636 billion. Thus, FBR is already reflecting a shortfall of PKR 196 billion. 

However, FBR had a target of collecting PKR 1,003 billion in taxes in the month of November 2024. Yet, the collection stood just over PKR 550 billion until the November 25, 2024. It means that FBR will have to resort to additional measures to support its tax collection in FY2025.

Moreover, the government has stated that the protests are resulting in loss of business as well. Overall, the economic losses are accounted to PKR 200 billion for the business community. The road blockades, internet disconnection and closure of markets are resulting in huge losses to the businesses across the country.

PTI Protest Jeopardizes IMF Programme

While Pakistan’s economy is already facing severe pressure in terms of all major indicators. The IMF Programme was a sigh of relief for the government. The conditions attached to the IMF Programme are linked to economic revival through stringent reforms. In particular, the programme focuses on meeting the country’s tax collection performance. It continues to monitor the performance through regular reviews. For this, the government has made a strict performance schedule for the Federal Board of Revenue to collect the specified taxes. Pakistan has an ambitious tax revenue target of PKR 13 trillion, a nearly 40% increase from the previous year in 2024.

Therefore, FBR teams are engaged in achieving the tax collection targets during the end of every month. However, the current collection is already around 50% of the total target for November 2024. Previously, the overall shortfall was lower than PKR 200 billion in the first four months. However, a significant increase of PKR 450 billion in a single month can jeopardize the IMF Programme. And it may result in imposing new taxation measures in the future.