The federal government has told the International Monetary Fund (IMF) that the US-Iran conflict and disruption in the Strait of Hormuz resulted in an estimated Rs144 billion loss in tax revenue during the first quarter of the current fiscal year.
Government officials presented the assessment to the visiting IMF review mission as part of ongoing discussions on Pakistan’s fiscal and economic performance. The estimate covers the period in which the regional conflict contributed to higher fuel costs and affected economic activity in Pakistan.
Higher fuel costs affected revenue
According to the government’s briefing, the disruption around the Strait of Hormuz pushed up fuel prices and created additional pressure on Pakistan’s economy.
Officials told the IMF that weaker economic activity affected tax collection, particularly sales tax and withholding tax collected at the import stage.
Pakistan relies heavily on imported fuel and other goods, meaning changes in international commodity prices and import volumes can directly affect government revenue.
The conflict therefore created pressure on both economic activity and tax receipts during the first quarter.
Strait of Hormuz disruption adds economic pressure
The Strait of Hormuz is an important global energy route, and disruptions in the region can affect international oil and fuel markets.
For Pakistan, higher international energy prices can increase the cost of imports and place pressure on businesses, consumers and the government’s fiscal position.
Pakistan’s government has previously acknowledged that the Middle East conflict created economic challenges, including higher energy costs. The country has also been monitoring oil supplies and international market developments as part of its response to the regional situation.
FBR still expects to meet quarterly target
Despite the estimated revenue loss, the Federal Board of Revenue (FBR) has told the IMF that it expects to achieve its first-quarter tax collection target.
The FBR’s target for July through September stands at Rs3.053 trillion.
Officials have indicated that September collections are expected to help offset earlier shortfalls and bring total first-quarter revenue to the target agreed with the IMF.
The revenue performance is being closely examined during the ongoing IMF review, which is assessing Pakistan’s fiscal position and implementation of programme commitments.
IMF reviews Pakistan’s economic performance
The IMF mission is currently conducting Pakistan’s fourth review under the $7 billion Extended Fund Facility (EFF) alongside the third review of the Resilience and Sustainability Facility.
Formal policy-level discussions began in Islamabad on September 28, with the mission expected to remain in Pakistan until the first week of October.
The review covers several areas, including tax collection, fiscal performance, foreign exchange reserves, the current account, energy-sector reforms and other commitments under the IMF programme.
If the reviews are completed successfully, Pakistan could become eligible for approximately $1 billion under the EFF and another $200 million under the RSF, according to reporting on the ongoing talks.
Revenue mobilisation remains a key issue
Tax collection remains an important part of Pakistan’s IMF programme as the government seeks to strengthen domestic revenue mobilisation.
The IMF has previously set a federal revenue target of more than Rs17 trillion for the full 2026-27 fiscal year, alongside additional revenue measures and reforms.
The latest assessment of the conflict’s impact therefore comes at a time when the government is trying to maintain revenue targets while dealing with external economic pressures.
The government’s briefing indicates that the estimated Rs144 billion impact was linked primarily to higher fuel costs and weaker economic activity during the first quarter.
Economic impact remains under review
The IMF is expected to consider the government’s assessment as part of its broader review of Pakistan’s economic performance.
While the reported revenue loss highlights the fiscal impact of the regional conflict, the government maintains that the FBR can still meet its first-quarter collection commitment.
The final assessment of Pakistan’s revenue performance will depend on actual collections through the end of September and the IMF’s review of the government’s reported figures.
For now, the government has told the IMF that external developments, particularly the US-Iran conflict and disruption in the Strait of Hormuz, created an estimated Rs144 billion tax revenue impact during the first quarter, while authorities continue efforts to meet the agreed revenue target.
