IMF warns regional tensions threaten Pakistan economy, calls for additional taxes

ISLAMABAD: The International Monetary Fund (IMF) has warned that rising regional tensions pose a serious threat to Pakistan’s economy and has suggested additional taxes to cover a revenue shortfall of around Rs194 billion in the first quarter of the current fiscal year.

Policy-level talks between Pakistan and the IMF under the second economic review are in their final stages, focusing on finalizing the draft Memorandum of Economic and Fiscal Policies (MEFP). The Finance Secretary led Pakistan’s economic team in meetings with the IMF mission, while Finance Minister Muhammad Aurangzeb is also expected to attend the talks.

Reports said the IMF had suggested imposing additional taxes and scrapping some concessions, although no agreement has been reached yet. Pakistan’s team maintained that collections from pending tax disputes and better enforcement would help cover the shortfall.

The IMF was also briefed on sugar sector deregulation, auto policy and tariff reforms, which aim to reduce state control and increase market-driven operations.

To ensure the successful conclusion of the review of the $7 billion Extended Fund Facility (EFF), the federal government has urged provincial authorities to promptly resolve pending IMF-related matters. Provincial chief secretaries and finance secretaries have been directed to submit a progress report within 24 hours.

The IMF warned that escalating regional conflicts could slow economic growth, disrupt external stability, and undermine investor confidence, while commodity prices could also rise amid global uncertainty.