IMF Presses Pakistan to End Tax Incentives by 2035 Under New Fiscal Reforms
ISLAMABAD – June 5, 2025:
The International Monetary Fund (IMF) has called on the Government of Pakistan to phase out all tax incentives currently offered to Special Technology Zones and Industrial Zones by 2035, as part of broader fiscal reform efforts.
During ongoing negotiations, IMF officials emphasized that Pakistan must submit a comprehensive phase-out plan before the end of this year. This requirement is part of the government’s commitments under the current agreement with the global lender.
According to IMF representatives, the move aims to promote fiscal discipline, eliminate revenue leakages, and enhance transparency in tax collection. The gradual elimination of sector-specific tax exemptions is expected to broaden Pakistan’s tax base and reduce its dependency on external financing.
Officials from Pakistan’s Ministry of Finance confirmed that the upcoming national budget is being prepared for the first time under a formal staff-level agreement with the IMF. This has added new layers of scrutiny and discipline to the budget-making process.
“The IMF has laid out clear conditions, and the government is committed to meeting all financial targets without exception,” a senior finance official told the press.
Sources within the ministry also indicated that the forthcoming federal budget will likely exclude any large-scale development projects due to strict fiscal limitations. Instead, the government is expected to implement comprehensive austerity measures to control the budget deficit and ensure compliance with IMF benchmarks.
The transition away from tax incentives—especially in emerging sectors like technology and industry—is expected to stir debate among stakeholders. However, officials argue that long-term economic stability requires difficult but necessary reforms.
As Pakistan prepares to unveil its federal budget later this month, all eyes are on how the government balances IMF demands with domestic economic and political realities.
