IMF Seeks Updates on Pakistan Digital Tax System Overhaul Amid Revenue Shortfall

The International Monetary Fund (IMF) has sought a comprehensive, output-driven update on Pakistan’s plans to digitize the revenue collection system, integrating artificial intelligence to expand the tax base and boost revenue. This initiative is a part of IMF’s Extended Fund Facility (EFF) to bolster Pakistan’s economic framework, with the first formal review meeting due by March 2025. The IMF delegation, led by Pakistan’s mission chief Nathan Porter, met with Finance Minister Muhammad Aurangzeb and top officials, including Minister of State for Revenue Ali Pervez Malik and FBR Chairman Rashid Mehmood Langrial. During the meeting, the IMF discussed progress on Pakistan Digital Tax System overhaul, mainly focusing on AI’s role in identifying tax evaders and track-and-trace system implementation.

IMF also expressed interest in Pakistan’s energy reform commitments, especially the upcoming discontinuation of gas supply to inefficient captive power plants (CPPs) by January 2025. This decision seeks to redirect resources to the national grid, despite considerable opposition from industrial stakeholders who favor continued gas supplies. Some CPP operators in the textile sector are supporting imported LNG at a blended cost due to limited electricity access in particular areas.

Pakistan’s power sector continues to wrestle with circular debt, which rose by Rs70 billion — quite below earlier projections. The recent approval of a circular debt management plan by the Economic Coordination Committee (ECC) highlights ongoing efforts to stabilize the sector. Furthermore, the IMF hopes that Pakistan meets digitalization and that its power sector qualifies for the next $1 billion disbursement. However, the government’s commitment to IMF benchmarks will play a key role in sustaining this critical financial support.

The IMF mission will reportedly hold a joint session with the power and petroleum divisions today to discuss their corresponding issues, including circular debt, planned tariff adjustments, loss reduction programs, and recoveries.

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