Pakistan to give IMF more detail on Rs853 billion discrepancy

Pakistan has assured the International Monetary Fund that it will provide more information on an Rs853 billion statistical discrepancy in the accounts of the federal and provincial governments, after a visiting IMF mission pressed officials on fiscal reporting, agricultural income tax collection and federal revenue prospects.

Sources said the mission asked the finance ministry about the discrepancy, of which Rs448 billion was in federal government accounts and Rs266 billion was reported by the Punjab government. Officials told the mission the gap stemmed largely from provincial investment in treasury papers and from a mismatch between cash withdrawals made before the end of June and actual spending from July onwards. A Punjab Finance Department official said the provincial figure reflected commercial account operations and differences between provincial and federal accounting procedures, adding that development funds released late in the year led to cheques being issued before 30 June while cash actually left account-1 after that date. Sources said the incomplete roll-out of the treasury single account was also a factor, because many government entities still do not deposit their funds in the single account. The finance ministry has assured the mission it will share further details, and sources said the discrepancy would not affect the government's primary budget surplus of 2.9% of GDP — a core condition of the IMF programme, which the government says it has met and expects the review talks to conclude on 7 October.

The mission also sought updates on agricultural income tax after rates were raised from 15% to 45%, matching the business income tax rate. It was told that collection remained weak last fiscal year and that Punjab and Sindh may again miss their targets this year. In Sindh, a target of Rs2 billion last year yielded Rs1.1 billion, and the province's Rs6 billion target for this year is expected to fall short by at least Rs3 billion, according to the sources. Punjab's budget books show collection of Rs4 billion against a target of Rs10.5 billion last year, with a target of Rs12.5 billion for this year. A memorandum of understanding between the FBR and the Sindh government requires the board to share data on agricultural income declared in its returns; the FBR has provided data on 44,350 people who declared such income for tax year 2025. The provincial government has said real-time connectivity between the FBR and the Sindh Revenue Board is needed, and has moved agricultural income tax administration from the Board of Revenue to the Sindh Revenue Board, introducing digital registration and filing that has produced 3,650 registrations and 1,912 returns.

On federal revenue, the Federal Board of Revenue missed last year's downward-revised target by Rs929 billion. It told the mission it would meet all key performance indicator targets, including digital invoicing and monitoring of production lines, and would hit its first-quarter target of Rs7 trillion, but remained non-committal on the annual target of Rs15.263 trillion, saying that depended on how the regional security situation unfolds, the sources said. Government officials have linked achievement of that target to the Middle East situation and its impact on Pakistan's economy. The mission also asked about the poor response to the government's second fixed tax scheme for traders, and was told the scheme was intended as a last chance before penalties are imposed.