In 2025, Pakistan’s hopes of meaningful tax relief for salaried taxpayers and corporations remain constrained by the International Monetary Fund (IMF)’s fiscal conditions, analysts and officials say, dimming expectations of broad cuts despite public calls for economic respite.
Under its ongoing IMF-supported Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF), Pakistan has agreed to stringent revenue targets and reform benchmarks that leave limited room for lowering tax rates, especially for documented incomes.
“The IMF’s focus is on revenue mobilisation and stabilisation rather than rate reductions,” said an economist close to fiscal policy discussions, citing projections indicating federal tax revenues are likely to remain flat over the coming years.
The government has already implemented contingency measures to protect revenue flows. As part of its IMF commitments, officials have pledged to introduce additional Federal Excise Duty (FED) steps and broaden the sales tax base if collection targets slip, options that could include duties on sugary items or other goods.
At the same time, Pakistan’s broader economic goals face hurdles. Export targets for 2025 are under strain amid weaker global demand and domestic competitiveness issues, challenging growth ambitions under the IMF’s macroeconomic forecasts.
Experts point out that while the tax‑to‑GDP ratio rose significantly in FY25, nearing IMF targets, this growth came from tightening compliance and expanding the tax net rather than lowering rates. This caution reflects the IMF’s insistence that tax relief must not undermine fiscal stability or jeopardise the reform programme.
Finance Minister and IMF representatives are expected to continue negotiations through 2026, balancing calls for relief from middle‑class taxpayers with obligations under the IMF programme.
Despite these pressures, stakeholders remain watchful, the next budget may include marginal tweaks to tax slabs, but significant tax relief in 2025 appears unlikely under existing IMF constraints.
