Pakistan Prepares Federal Budget 2026-27 Amid IMF Tax Negotiations

Updated: 6:55 PM PKT — June 1, 2026

Prime Minister Shehbaz Sharif has announced that the upcoming federal budget will include additional measures to promote industrial development and export-led growth. Following a meeting with business leaders, the prime minister directed the Federal Board of Revenue (FBR) to resolve all pending tax refund cases by June 15.

In a significant move to support exporters, the prime minister stated that the Export Finance Scheme rate will be maintained at 4.5% until June 2027, despite a recent policy rate increase. Other directives included relocating the PRAL head office to Karachi and establishing a new passport office in Gujrat to facilitate the business community.

Updated: 5:52 PM PKT — June 1, 2026

As Pakistan prepares its upcoming federal budget, the International Monetary Fund (IMF) is pushing for a comprehensive reform agenda focused on fiscal consolidation. Key demands include increasing tax revenue by broadening the tax base, reducing exemptions, and improving administrative enforcement.

The IMF is also urging Pakistan to address the energy sector’s circular debt, restructure loss-making state-owned enterprises, and enhance governance and transparency in public financial management. The agenda also covers maintaining macroeconomic stability while protecting targeted social spending.

Updated: 1:14 PM PKT — June 1, 2026

Pakistan’s government may be forced to shelve nearly Rs3 trillion in development projects for the upcoming 2026-27 fiscal year due to a massive funding gap, Planning Minister Ahsan Iqbal announced. Against project demands totalling around Rs4 trillion, the Public Sector Development Programme (PSDP) has an allocation of only Rs1.126 trillion. The minister highlighted that nearly Rs10 trillion is required to complete all ongoing development projects across the country.

Iqbal stated there is “virtually no fiscal space available for a new project,” explaining that after accounting for committed expenditures, rupee cover for foreign-funded projects, and other allocations, the effective development budget is in a negative balance. He noted that development investment has declined from 2.6 percent of GDP to just 0.6 percent over the past eight years. Meanwhile, the Annual Plan Coordination Committee is considering a GDP growth target of 4 percent for the next fiscal year.

Updated: 11:42 AM PKT — June 1, 2026

The federal government is reportedly considering significant tax relief for the real estate sector for filers in the upcoming 2026-27 budget. Proposals include lowering the withholding tax on property purchases from 1.5% to 0.25% and reducing the tax on property sales from 4.5% to 1.5%. Officials have briefed the International Monetary Fund on these potential adjustments, which are not expected to extend to non-filers.

In a related development, President Asif Ali Zardari has summoned the budget session of Parliament for June 5. The National Assembly will convene at 5 pm, followed by the Senate at 6 pm, to deliberate on the new fiscal year’s financial plan.

Updated: 10:41 AM PKT — June 1, 2026

ISLAMABAD – The Annual Planning Coordination Committee (APCC) is set to meet on Monday to finalize recommendations for the federal development budget and annual economic plan for fiscal year 2026-27. A proposed allocation of Rs1.126 trillion for the federal Public Sector Development Programme (PSDP) is on the agenda. The committee will also review the performance and fund utilization of the outgoing fiscal year.

Key macroeconomic targets will also be determined, with sources indicating the economic growth target is likely to be set at 4% or higher, while the average inflation target may be fixed between 8.2% and 8.6%. Following the meeting, the APCC’s recommendations will be forwarded to the National Economic Council for final approval.

Updated: 8:35 AM PKT — June 1, 2026

Despite achieving macroeconomic stability and staying on track with its IMF programme, the economy is experiencing a deep stagnation felt by ordinary citizens. Industries are operating below capacity, investment has stalled, and real wages have not recovered from years of high inflation, leading to widespread unemployment and emigration.

The upcoming federal budget is expected to continue this trend, prioritising IMF compliance over public relief or structural reform. The government is bound by a quantitative performance criterion to meet a challenging FBR revenue target of Rs 15.3 trillion. Consequently, any modest tax relief for the salaried class is likely to be offset by increased costs elsewhere, deepening the low-growth equilibrium without addressing the fundamental policy failures that repeatedly lead Pakistan back to the IMF.