Islamabad, December 12, 2025 – Pakistan has assured the International Monetary Fund (IMF) that it will introduce new tax measures if revenues fall short during the fiscal year 2025–26. The commitment was outlined in the Letter of Intent (LoI) signed by Finance Minister Muhammad Aurangzeb and State Bank of Pakistan Governor Jameel Ahmad, included in the IMF’s latest country report released on December 11.
According to the report, Pakistani authorities stated that the economic program supported by the Extended Fund Facility (EFF) is beginning to deliver results. They highlighted improvements in economic activity, stabilizing inflation, and stronger external buffers. However, the government noted that recent severe floods have caused widespread disruption, reinforcing the need for climate-resilient policies backed by the Resilience and Sustainability Facility (RSF).
Pakistan met all but one of the June 2025 Quantitative Performance Criteria (QPCs), including exceeding the floor on net international reserves and achieving the primary budget target. The only missed criterion was related to BISP spending, which fell short due to administrative savings. Authorities also acknowledged weaknesses in tax administration and provincial spending on health and education.
Significant progress has also been made on structural reforms, with eight structural benchmarks met on time. However, the government delayed the introduction of Federal Excise Duty (FED) on fertilizers and pesticides to avoid overburdening the agriculture sector amid ongoing reforms and flood impacts. Officials have now committed to implementing the FED as a contingency measure if revenue collection weakens.
The LoI also revealed that Pakistan temporarily waived taxes on emergency sugar imports due to shortages, breaching a continuous benchmark. The government has pledged to deregulate the sugar sector to avoid future distortions.
Authorities reaffirmed their commitment to prudent fiscal management, including:
• Strict execution of the FY26 budget with readiness to adopt new tax policy measures if required
• Maintaining tight monetary policy to keep inflation within target
• Regular energy tariff adjustments
• Reforms aimed at reducing government footprint and improving governance
Pakistan has requested the IMF Executive Board to approve a waiver for the missed BISP QPC, modifications in December QPCs, completion of the second EFF review with a disbursement of SDR 760 million, and approval of the first RSF review with related disbursements worth SDR 153.8 million.
The government emphasized full coordination across all provinces, pledging not to introduce any measures that may undermine the IMF program. Islamabad also agreed to consult the IMF before making any policy adjustments that could deviate from agreed program goals.
The authorities concluded by consenting to the publication of the LoI, the MEFP, and associated documents, reflecting transparency in program implementation.