IMF urges Pakistan to broaden tax base and deepen reforms as growth rises to 3.5%, Binici tells SDPI conference
The IMF's Resident Representative, Dr Mahir Binici, told the SDPI conference in Islamabad that Pakistan needs a broader, simpler and fairer tax system, with revenue of at least 15 per cent of GDP, to turn stabilisation into lasting growth.
The International Monetary Fund has urged Pakistan to move beyond macroeconomic stabilisation and undertake deeper structural reforms, warning that a broader, simpler, fairer and more predictable tax system is now the central test of whether the country's recovery can turn into lasting growth.
The call came from the Fund's Resident Representative in Pakistan, Dr Mahir Binici, who was speaking on Thursday at the closing plenary of the Sustainable Development Policy Institute's 29th Sustainable Development Conference in Islamabad. The session, titled "Where Reforms Matter the Most for Growth?", was organised with the Ministry of Finance and brought together senior officials, economists and development partners at the end of the three-day conference.
Binici praised Pakistan's efforts to maintain economic stability through a difficult period of global and domestic shocks, but he was clear that stabilisation alone would not be enough. "Pakistan had reached a critical juncture," he told the conference, where the conversation needed to move beyond taxation alone and focus on how reforms translate into investment, economic activity, exports, employment and better living standards.
At the heart of his message was the tax system. He said the Fund's research showed that emerging and developing economies such as Pakistan needed to mobilise revenue equivalent to at least 15 per cent of gross domestic product to sustain a strong, well-functioning state capable of delivering public services — and that Pakistan remained far from that level. "We need a broader, simpler, fairer and more predictable taxation system," he said. "That would also enable increasing revenue, not only for the sake of increasing revenue but also generating the resources that the country needs, whether for human capital, infrastructure or investment."
He set out five reform priorities for the period ahead: preserving macroeconomic stability, improving the allocation of public resources, reducing the cost of doing business, developing a growth-friendly fiscal system, and strengthening governance. Each, he argued, reinforced the others — stability without better spending and fairer taxation would not deliver the private investment Pakistan needs, while reforms without stability would not survive.
Crucially, Binici said revenue mobilisation could not remain confined to federal taxation. He urged provincial governments to expand their own revenue bases, pointing to three areas in particular: harmonising the general sales tax on services across the federation and the provinces, bringing agricultural income properly into the tax net, and strengthening property taxation. These are long-standing gaps in Pakistan's tax structure, and the Fund has repeatedly said closing them is essential to broadening the base rather than repeatedly raising rates on those already paying.
On spending, he said improving the allocation of public resources mattered as much as raising revenue, with more money directed towards high-return infrastructure, healthcare, education and targeted social protection rather than inefficient and preferential activities. He noted that spending on health and education had risen from around two per cent of GDP over the past two to three years, and that the government intended to lift it to between 2.8 and 3 per cent in the current fiscal year.
Binici also offered an upbeat assessment of where the economy stands. Pakistan's economic growth rate was rising from 2 per cent to 3.5 per cent, he said, describing the improvement as a significant development and a historic turning point. The country, he added, had moved from economic crisis towards stability, with reforms being implemented and meetings held with the authorities over several months to increase tax revenues. He credited the National Tariff Policy with contributing to the improvement and said the IMF would continue working with Pakistan over the long term to achieve economic stability.
The remarks echoed a similar message delivered by the Fund's regional director, Jihad Azour, at a finance ministry workshop in Islamabad in late October, where he called tax reform central to the objectives of Pakistan's $7 billion Extended Fund Facility. Finance Minister Muhammad Aurangzeb told that workshop that Pakistan's twin deficit had fallen from a combined 12.5 per cent of GDP to 2.6 per cent, and that the economy had returned to growth after a 0.3 per cent contraction — but that Pakistan needed export-led growth rather than the consumption-driven expansions behind past boom-and-bust cycles.
What happens next will depend on implementation. The Fund's programme sets out a clear direction — a broader base, fewer exemptions, better administration and predictable policy — but the hardest steps, from provincial tax harmonisation to agricultural income taxation, require political agreement across the federation. If those reforms advance, Binici's message suggests, Pakistan could convert its hard-won stability into the investment, jobs and living standards the conference was convened to discuss; if they stall, the country risks another cycle of stabilisation followed by relapse.
Figures checked at 00:50 PKT on 6 November 2026. This post is market news information only, not financial advice.
More in Business & Finance
Photo: The old State Bank of Pakistan building in Karachi, now the State Bank Museum (file image)
Business & FinancePakistan's foreign exchange reserves hit record $26.86 billion as State Bank holdings climb to $21.56 billion
Pakistan's total liquid foreign exchange reserves reached a record $26.864 billion in the week ended 30 October, the State Bank said, with its own holdings rising to $21.561 billion despite the Gulf war's strain on the economy.
Photo: Terraced housing in Pakistan (file image)
Business & FinancePakistan disburses Rs104 billion in Apna Ghar housing loans to nearly 18,000 families in six months
Disbursements under the Prime Minister's Apna Ghar Programme have surged 404 per cent since June, reaching Rs104 billion through 17,697 loans as of 30 October, the finance minister's adviser says.
Photo: A petrol station in Punjab, Pakistan (file image)
Business & FinancePetrol cut by Rs9.41 and diesel by Rs5.56 a litre for 6 November in fourth straight daily reduction
OGRA has fixed petrol at Rs352.59 and high-speed diesel at Rs382.25 a litre from Friday, extending a run of daily cuts that has taken petrol down more than Rs25 a litre in under a week as global oil prices slide.