The International Monetary Fund (IMF) is likely to revise Pakistan’s revenue collection target down to Rs. 12,480 billion for the current fiscal year, a reduction of Rs. 490 billion from the original target of Rs. 12,970 billion.

The lender is expected to recommend that the Revenue Division further decrease this fiscal year’s revenue target below Rs. 12.5 billion. Additionally, the IMF will advise the finance ministry to either cut government expenditures by Rs. 500 billion or implement new revenue measures, such as a mini-budget, to enhance tax collection.

The government is set to determine its course of action during policy-level discussions scheduled to begin next week.

In related developments, representatives from the tobacco industry urged the IMF review mission on Wednesday to lower the Federal Excise Duty (FED) on cigarettes by 25 percent and introduce a third tax tier. They cautioned that significant hikes in FED have led to a decline in tax-paying cigarette sales and an increase in illicit trade.

The industry reported a surge in tax collections from tobacco, rising from Rs. 148 billion in 2021-22 to Rs. 277 billion in 2023-24. However, projections indicate a decline to Rs. 243 billion by June 2025, with further drops expected to Rs. 223 billion by 2026-27.

Officials from the Federal Board of Revenue (FBR) warned that approving the tobacco industry’s request could result in a revenue loss of Rs. 50 billion. They attributed the decline in tax-paying cigarette volumes to increased smuggling and tax evasion, which is estimated to cause an annual loss of approximately Rs. 300 billion ($1.1 billion) to the national exchequer.