The federal government has outlined sweeping fiscal adjustments during Pakistan budget 2025-26 IMF talks, focusing on lowering trade barriers and stimulating industrial activity. In a key meeting with the International Monetary Fund, officials proposed targeted reductions in duties on vehicles, auto parts, and essential industrial raw materials as part of the upcoming budget for fiscal year 2025–26.

According to officials briefed on Pakistan budget 2025-26 IMF talks, the government has recommended scrapping the existing 2 percent additional customs duty on auto spare parts. This proposal is intended to ease pressure on manufacturers and consumers while supporting localization in the automotive supply chain.

Vehicle and Auto Parts Duties Under Review

As part of Pakistan budget 2025-26 IMF talks, authorities are also considering a phased reduction in customs duty slabs currently ranging from 4 percent to 7 percent. In addition, a 20 percent cut in existing customs duties on vehicles is under serious consideration. At present, vehicle duties range from 15 percent to as high as 90 percent, contributing to high prices and limited market access.

Officials believe these measures under Pakistan budget 2025-26 IMF talks could help rationalize the tariff structure, discourage under-invoicing, and gradually improve affordability without abruptly undermining domestic assembly operations.

Export Push Through Cheaper Raw Materials

A central objective of Pakistan budget 2025-26 IMF talks is to boost exports by up to $5 billion through targeted tax relief. To achieve this, the government has proposed reducing duties on raw materials used in key industries such as textiles, chemicals, plastics, auto parts manufacturing, and iron and steel production.

Discussions during Pakistan budget 2025-26 IMF talks also include lowering duties on semi-finished goods and industrial inputs, a step aimed at improving cost efficiency, expanding capacity utilization, and encouraging value-added exports across multiple sectors.

Real Estate and Withholding Tax Considerations

Sources involved in Pakistan budget 2025-26 IMF talks revealed that the real estate sector may also see limited tax relief. A reduction of 0.5 percent in withholding tax on the purchase and sale of property is being evaluated to revive transaction volumes, promote documentation, and stabilize a sector that has remained subdued amid high taxes and regulatory pressure.

Related: Budget 2025–26: Major Relief Expected for Car Buyers in Pakistan

FBR Targets and Revenue Measures

Under the Pakistan budget 2025-26 IMF talks framework, the Federal Board of Revenue has been assigned a proposed revenue target of Rs. 14,305 billion for the next fiscal year. Of this amount, Rs. 600 billion is expected to be generated through stronger enforcement of existing tax laws, while Rs. 400 billion is projected to come from new policy initiatives.

The remaining growth in revenue under Pakistan budget 2025-26 IMF talks is expected to come from economic expansion, improved compliance, and reduced leakages rather than broad-based tax rate increases.

Agricultural Income Tax and IMF Expectations

Another major reform discussed during Pakistan budget 2025-26 IMF talks is the plan to initiate tax collection on agricultural income starting July 1, 2025. This long-pending step aligns with IMF demands to widen the tax net and address structural imbalances in Pakistan’s revenue system.

Meanwhile, the IMF continues to stress the need for Pakistan to broaden its tax base, reduce exemptions, and document larger segments of the economy. The outcome of Pakistan budget 2025-26 IMF talks will be crucial in shaping fiscal policy, investor confidence, and economic stability in the year ahead.