FBR estimates Rs144bn revenue loss in July-September as energy disruptions linked to the Strait of Hormuz weigh on economic activity and tax collection.
ISLAMABAD: The ongoing Middle East conflict has cost Pakistan more than Rs140 billion in tax revenue during the first quarter of the current fiscal year, as disruptions to regional energy routes and the Strait of Hormuz have affected economic activity and tax collection.
According to estimates presented by the Federal Board of Revenue (FBR) to the visiting International Monetary Fund (IMF) review mission, the external shock resulted in an estimated Rs144 billion revenue loss during July-September 2026.
Despite the significant impact, the tax authority has expressed confidence that it will achieve the quarterly revenue collection target agreed with the IMF.
FBR expects to meet quarterly tax target
FBR officials told the IMF mission that the board is expected to collect approximately Rs1.33 trillion in September, against a monthly target of around Rs1.343 trillion.
The expected September collection would enable the FBR to achieve its overall July-September target of Rs3.053 trillion, according to government sources.
Revenue authorities attributed the estimated loss associated with the Middle East conflict to disruptions involving the Strait of Hormuz, which pushed up international and domestic fuel costs while simultaneously slowing economic activity in Pakistan.
Import-stage taxes hit by energy disruption
The impact was particularly visible in sales tax and withholding tax collections at the import stage, officials explained.
Higher energy and transportation costs, coupled with weaker economic activity, affected the tax base and reduced revenue generation during the quarter.
The Strait of Hormuz is a critical route for global energy shipments, and disruption to the waterway has created significant economic risks for countries dependent on imported fuel.
Pakistan has previously highlighted the vulnerability of its economy to higher international oil prices and disruptions to major energy routes.
Government flags risks to fiscal stability
The government has acknowledged that disruptions involving the Strait of Hormuz and other regional energy corridors pose risks to Pakistan’s fiscal and external stability.
Finance Minister Muhammad Aurangzeb has stressed the importance of strengthening fiscal and external buffers to deal with external shocks affecting the economy.
For Pakistan, higher global energy costs can simultaneously increase the import bill, raise domestic fuel prices and put pressure on economic activity, creating challenges for both revenue collection and the external account.
FBR collection rises 3.7% in July-August
Despite the revenue pressures, FBR officials remain confident about achieving the first-quarter target.
The latest figures show that tax collection during July-August FY2026-27 reached Rs1.722 trillion, compared with Rs1.661 trillion in the corresponding period of the previous year.
This represents an increase of approximately 3.7% year on year.
September’s collection will therefore be critical to determining whether the FBR can deliver the full quarterly target of Rs3.053 trillion, despite the estimated revenue loss linked to the regional conflict.
IMF review puts revenue performance under focus
The FBR’s ability to meet the quarterly target is being closely monitored under Pakistan’s IMF programme, particularly as the government seeks to maintain fiscal consolidation while managing external shocks.
The latest revenue impact highlights the sensitivity of Pakistan’s tax collection to developments beyond its borders, particularly when geopolitical disruptions affect petroleum imports, trade flows, fuel prices and domestic consumption.
The estimated Rs144 billion revenue loss also underlines the fiscal challenges created when external energy shocks affect economic activity while the government remains committed to meeting its revenue and fiscal targets.