IMF Pushes Pakistan for Revenue Growth and Spending Cuts

The International Monetary Fund (IMF) has urged Pakistan to enhance revenue collection and reduce expenditures as part of ongoing policy-level discussions concerning the country’s economic outlook and the disbursement of the next loan tranche under the $7 billion program.

Sources indicate that the government has proposed a tax revenue target exceeding Rs15,000 billion for the upcoming fiscal year, aiming to push the tax-to-GDP ratio to 13 percent. Meanwhile, non-tax revenues are projected to hit Rs2,745 billion.

Pakistan anticipates economic growth exceeding 4 percent next fiscal year, with inflation expected to drop to single digits. However, external financing challenges persist, as the country requires over $20 billion to meet its foreign payment obligations.

To address budgetary constraints, the government has eliminated 150,000 vacant posts in the public sector and is considering amendments to the Civil Servants Act, 1973, to further reduce redundant positions. A voluntary retirement scheme and a Golden Handshake program are also under review.

The IMF has emphasized structural reforms, particularly in the energy sector. It has linked a proposed electricity tariff reduction of Rs2 per unit to the privatization of loss-making power distribution companies (DISCOs). The first phase of privatization will include Islamabad, Faisalabad, and Gujranwala DISCOs, followed by Lahore, Multan, and Hyderabad.

Despite these challenges, Finance Ministry officials remain hopeful about securing the next $1 billion tranche, which they believe will stimulate industrial growth and create job opportunities. Key decisions on taxation and power tariffs will be finalized in the coming months, pending IMF approval.