ISLAMABAD – International Monetary Fund (IMF) urged Pakistan to accelerate tax reforms, expand revenue collection and bring under-taxed sectors into the national tax net amid call for greater participation of women in the workforce, stronger private-sector investment and export-oriented economic policies to secure sustainable growth.
The recommendations come as Pakistan continues implementing its $7 billion IMF bailout programme, with another $1.21 billion in financing expected to become available following the approval of the latest programme reviews.
Speaking at a conference organised by Sustainable Development Policy Institute (SDPI), IMF Resident Representative in Pakistan Dr. Mahir Binici emphasized that the country must move beyond short-term economic stabilization and build a taxation system capable of supporting long-term development.
He identified a broader, simpler, fairer and more predictable tax structure as essential for generating the financial resources needed to improve infrastructure, strengthen human capital, encourage investment and raise living standards.
IMF representative’s remarks reinforced the Fund’s longstanding position that Pakistan cannot achieve sustainable fiscal stability without increasing its tax-to-GDP ratio and addressing structural weaknesses in revenue collection. Pakistan’s tax-to-GDP ratio remains relatively low, at approximately 10 to 11 percent, while the IMF has previously advocated raising it towards 15 percent.
Binici had also highlighted the 15 percent target during an SDPI conference in 2025, linking stronger domestic revenue generation to Pakistan’s ability to confront economic pressures and climate-related challenges. However, the IMF’s approach is not limited to increasing tax rates on existing taxpayers.
IMF consistently pushed Pakistan to extend taxation to sectors that contribute relatively little to government revenue despite their significant economic activity. These include retail, agriculture, real estate and other segments that remain inadequately covered by the existing taxation framework.
Beyond taxation, Binici stressed governance, arguing that institutional accountability and transparent decision-making should form an integral part of economic policymaking. He welcomed the Pakistani authorities’ Governance and Corruption Diagnostic and their efforts to formulate an economic governance reform plan.
IMF increasingly linked governance improvements with Pakistan’s broader economic recovery, particularly in areas involving public finances, state institutions, investment conditions and accountability. The reform agenda also includes digital invoicing, risk-based tax audits and stronger enforcement measures designed to improve compliance and reduce revenue leakages.
Pakistan Awaits Another $1.21 Billion Under IMF Programme
The latest policy recommendations come at a crucial stage in Pakistan’s ongoing relationship with the IMF. The country entered a 37-month Extended Fund Facility (EFF) arrangement worth approximately $7 billion in September 2024, aimed at restoring macroeconomic stability and supporting structural reforms.
A separate Resilience and Sustainability Facility (RSF), valued at approximately $1.4 billion, was approved in May 2025 to support climate resilience and related policy improvements over roughly 28 months.
Earlier this year, Pakistan and IMF reached staff-level agreement on the fourth review of the EFF and the third review of RSF. After approval by the IMF Executive Board, Pakistan is expected to receive approximately $1.21 billion, including around $1 billion under the EFF and $210 million through the RSF.
The disbursement would increase cumulative financing under the programmes to approximately $5.7 billion. The Executive Board is expected to consider the reviews in December 2026, although the release of funds remains subject to its formal approval.
Under the programme, Pakistan is pursuing a series of fiscal and economic adjustments intended to strengthen public finances and reduce long-standing vulnerabilities. A major fiscal objective is the achievement of a primary surplus equivalent to approximately 2 percent of GDP during fiscal year 2026-27.
Pakistan experienced improvements in several macroeconomic indicators, including foreign exchange reserves, inflation and economic growth, as authorities continue implementing measures agreed with international lenders. However, the transition from economic stabilization to sustained expansion remains dependent on reforms that extend beyond immediate fiscal adjustments.
