The International Monetary Fund (IMF) has prohibited the Federal Board of Revenue (FBR) from reducing transaction taxes on Pakistan’s property sector, contradicting earlier claims by government officials that the IMF had agreed in principle to lower the withholding tax on property purchases by 2 percent starting April 1, 2025.
In addition to maintaining property transaction taxes, the IMF has also rejected proposals to lower tax rates on tobacco and beverages. Furthermore, the federal government has been instructed to provide written assurances that provinces will refrain from wheat procurement in the event of a shortage.
Despite these restrictions, the IMF has expressed willingness to expand Pakistan’s $7 billion Extended Fund Facility (EFF) by including climate-related funding under the Resilience and Sustainability Facility (RSF). While the exact amount remains uncertain, earlier reports suggest that up to $1.2 billion could be allocated for a Climate Resilience Fund (CRF).
IMF Resident Representative Mahir Binci confirmed that the lender has not approved any reduction in withholding taxes on property transactions or adjustments to tax collection targets for March 2025. This development raises concerns that the FBR may miss its revenue target of Rs. 1,220 billion for the current month. To address the shortfall, a proposal has been made to shift the unmet target to April and May instead of June.
