Next IMF Budget Expected to Hit Salaried Pakistanis Harder Than Ever

Pakistan will start the 2026-27 federal budget’s negotiations with the International Monetary Fund (IMF) next week. The federal government is seeking reductions in income tax rates for salaried workers, particularly middle-income earners, alongside tiny cuts in corporate taxes. The government is also examining proposals to abolish the super tax and withdraw the capital value tax, but all will be in vain without IMF approval. Power subsidies are projected to remain capped at around Rs. 890 billion, or may be scrapped altogether on IMF demands. An IMF mission is expected to arrive in Islamabad on Tuesday for talks focused on roughly Rs. 230 billion in new tax revenue measures to meet the lender’s conditions. Politicians will present a new taxation framework for traders, under which businesses could be charged income tax equal to 1 percent of annual turnover. The scheme is likely to apply to traders with annual sales up to around Rs. 300 million. The IMF is pushing for a tightly controlled budget. Pakistan has committed that any tax relief offered to salaried individuals or companies must be fulfilled elsewhere in the shape of higher taxes to maintain revenue targets. The upcoming budget is expected to target total tax collection of about Rs. 15.3 trillion. Under IMF benchmarks, Pakistan must limit the overall fiscal deficit to roughly 3.5 percent of GDP while generating a primary budget surplus of Rs. 2.8 trillion. A mini-budget could become necessary later in the fiscal year if revenue targets are missed. The IMF has also imposed strict expenditure controls. Growth in current government spending cannot exceed projected inflation of about 8.4 percent. Tax experts have proposed major structural changes, including a simplified tax system for salaried individuals and stricter rules allowing authorities to tax previously undeclared assets when discovered rather than when acquired.