The International Monetary Fund (IMF) has advised Pakistan to gradually withdraw federal financial support for provincial development initiatives under the Public Sector Development Programme (PSDP), urging provinces to become financially self-reliant.
The recommendation came during virtual meetings between the IMF and provincial governments, focused on budget planning for the 2025–26 fiscal year. The Fund called for increased provincial autonomy in resource generation, including the enforcement of income tax on agricultural earnings above PKR 600,000 per year, starting July 1, 2025, without any exemptions.
The IMF expressed satisfaction with the current fiscal performance of both federal and provincial administrations and secured commitments from provinces to maintain a budget surplus in the upcoming fiscal cycle.
A high-level IMF delegation is scheduled to arrive in Islamabad on May 18 to continue budget-related talks with key institutions, including the Ministry of Finance, Planning Commission, Federal Board of Revenue (FBR), and the State Bank of Pakistan.
Additionally, the IMF has pressed Pakistan to raise tax revenues by Rs 430 billion, setting a challenging tax collection goal of Rs 14.3 trillion for the 2025–26 federal budget. The Fund emphasized the urgent need to widen the tax base, expedite the resolution of pending tax disputes, and implement stronger enforcement mechanisms to meet the target.