The Federal Board of Revenue (FBR) is facing a projected revenue collection shortfall of Rs272 billion for the current fiscal year, according to the International Monetary Fund (IMF).
In its recently released country report on Pakistan, the IMF outlined concerns that the FBR may fall short of the actual target of Rs4,963 billion, estimating the collection to be around Rs4,691 billion.
The government had initially set an ambitious revenue collection target of Rs4,963 billion for the current fiscal year. However, the IMF’s projections indicate a potential gap of Rs272 billion, raising questions about the feasibility of meeting the set target for the fiscal year 2020/2021.
The tax to GDP ratio for the ongoing fiscal year is projected at 10.2 percent, representing an increase from the previous fiscal year’s ratio of 9.6 percent. Despite the challenges faced by the FBR in meeting the revenue targets, the higher tax to GDP ratio suggests an effort to enhance tax collection relative to the overall economic output.
The IMF’s projections highlight the need for strategic measures to address the existing revenue challenges. While the current fiscal year may present difficulties in achieving the targeted revenue collection, the IMF anticipates better growth in revenue collection in the coming years.
For the fiscal year 2021/2022, the IMF projects a revenue collection target of Rs5,963 billion, signaling an optimistic outlook compared to the current year. Looking further ahead, the fiscal year 2022/2023 is expected to see a more substantial increase, with a projected revenue collection target of Rs6,941 billion.
The projections underscore the significance of implementing effective fiscal policies, enhancing tax administration, and fostering economic growth to achieve sustainable revenue targets. The government’s commitment to addressing structural challenges and creating an enabling environment for businesses will play a pivotal role in determining the success of future revenue collection efforts.
As the country navigates economic uncertainties and works towards recovery, a comprehensive strategy that aligns with international best practices and addresses specific challenges in the tax collection system becomes imperative. Collaboration between the government, private sector, and international financial institutions is crucial to developing and implementing policies that promote fiscal discipline and economic stability.
While the revenue collection challenges persist, the IMF’s projections also present an opportunity for the government to reassess and refine its strategies. Adapting to changing economic landscapes and implementing targeted reforms can contribute to achieving sustainable revenue growth and, consequently, the overall economic development of Pakistan. The coming fiscal years will be instrumental in determining the effectiveness of these strategies and the country’s ability to meet and surpass revenue targets.
