The International Monetary Fund (IMF) has reportedly expressed dissatisfaction with the slow pace of Pakistan’s economic reforms, particularly delays in bringing agricultural income and the retail sector into the tax system.
According to reports citing sources familiar with the matter, the international lender has raised concerns about the country’s extensive informal economy and the limited progress made in expanding the number of taxpayers.
The IMF reportedly cautioned that concentrating tax collection efforts primarily on shopkeepers would not be sufficient to achieve the government’s revenue objectives, stressing the need for a broader and more equitable approach.
The concerns come as Pakistan continues efforts to strengthen public finances, improve revenue collection and meet its economic reform commitments.
The lender has reportedly identified agricultural income taxation as an area where implementation has fallen behind expectations. Provincial governments have made limited progress in registering agricultural taxpayers, while the target for agricultural income tax returns during the 2025-26 financial year was not achieved.
The IMF has also questioned the continuation of tax exemptions and preferential treatment in the agricultural sector, urging authorities to accelerate reforms and ensure more consistent taxation across different sources of income.
Since agricultural income taxation falls primarily within provincial jurisdiction, effective implementation requires close coordination between the federal government and provincial administrations.
The lender has reportedly characterised overall progress on agricultural and retail taxation as unsatisfactory, calling for stronger enforcement and the removal of obstacles preventing wider participation in the tax system.
The IMF has also emphasised the importance of increasing Pakistan’s tax-to-GDP ratio to at least 15 per cent, according to the reports.
Achieving this target would require higher tax revenue relative to the size of the national economy, potentially through improved compliance, reduced exemptions and the inclusion of economic activities that currently contribute little to government revenues.
The Fund has reportedly recommended greater uniformity in tax rates across different categories of income to address disparities and strengthen the fairness of the taxation system.
Pakistan has long faced difficulties expanding its tax base, with substantial economic activity remaining outside formal documentation and taxation arrangements.
The IMF’s reported recommendations suggest that sustained revenue growth will depend not only on collecting more taxes from existing taxpayers but also on bringing previously undertaxed sectors into the system.
Alongside its concerns over revenue collection, the international lender has reportedly urged the government to increase spending on health and education.
Greater investment in these sectors could help address gaps in public services and support long-term economic development.
However, expanding expenditure on essential services would also require stronger revenue mobilisation and effective management of public finances.
The IMF’s reported assessment highlights the continuing challenges facing Pakistan’s economic reform programme, particularly the need to broaden taxation, improve coordination between federal and provincial authorities, and create sufficient financial resources for public services without placing disproportionate pressure on existing taxpayers.