‘Mini-Budget’ likely as FBR misses tax collection target

ISLAMABAD: The International Monetary Fund (IMF) has sought a mini-budget from the federal government after the Federal Bureau of Revenue (FBR) failed to meet its tax collection target, sources said. Geo News Saturday.

According to sources in the tax collection body, the global lender rejected Islamabad’s request to reconsider the FBR’s fiscal targets in a virtual meeting.

Experts said the tax shortfall could create obstacles to the release of the second tranche of the $7 billion Extended Fund Facility (EFF) loan program guaranteed by the current government in July this year.

Amidst this, insiders said a mini-budget of Rs 500 billion is available to make up the revenue shortfall.

The development comes as the tax collection authority, as reported by The News, is facing a shortfall of around Rs 190 billion in the first four months (July-October) after managing to collect only Rs 3.440 billion against the assigned target of Rs3, 636 billion.

In October 2024, the FBR collected Rs877 billion against the assigned target of Rs980 billion, recording a deficit of Rs103 billion. The FBR faced a deficit of Rs 91 billion in the first quarter (July-September) of the current fiscal year.

The government has allocated the target of Rs 12,913 billion for the current fiscal year under the agreement with the IMF. Parliament approved the FBR target of Rs 12,970 billion for the current fiscal year.

The failure to achieve its target led to Prime Minister Shehbaz Sharif’s administration to reshuffle the top guns of both the Inland Revenue Service (IRS) and the Customs Group, including member IR Operations and three Chief Commissioners of the Grand Bureau for Taxpayers.

The potential mini-budget came after the FBR had in September explicitly ruled out any such possibility. However, in a meeting of the Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla, FBR Member Policy Hamid Ateeq Sarwar admitted the difficulty in achieving the fiscal target for the current fiscal year.

In June, the incumbent government passed a high-tax budget in its hopes of securing a new bailout from the IMF. The move succeeded in securing an agreement between Islamabad and the lender for a 37-month loan program.

Since then, the country has already received the first tranche of $1.03 billion (SDR 760 million) under the FEF, amid intense government efforts to address the various economic challenges facing the cash-strapped country.

With positive indications on the economic front such as 31.1% reduction in trade deficit, annual inflation rate of 7.2% etc., Islamabad has requested around $1 billion in an official request for funding from the IMF facility that helps low- and middle-income countries. manage external shocks, Finance Minister Muhammad Aurangzeb confirmed last month.

Pakistan’s economy, according to the IMF projection, is expected to register a boost with a GDP growth rate of 3.2% for fiscal year 2025, on the back of waning inflationary pressures.