KARACHI — Pakistan’s provinces are now legally required to strengthen their own tax collection instead of relying heavily on transfers from the federal divisible pool, according to Khurram Schehzad, adviser to the finance minister.
His remarks come ahead of an International Monetary Fund mission scheduled to arrive in Islamabad on September 23 to review Pakistan’s economic performance under the ongoing programme.
Schehzad said federal revenue collection remained on track during the first two months of the current fiscal year. According to him, the Federal Board of Revenue achieved its tax collection targets for July and August in line with projections for fiscal year 2026-27.
Revenue performance is expected to be an important part of the upcoming discussions between Pakistani authorities and the IMF delegation.
Schehzad said a formal fiscal pact between the federal and provincial governments under the IMF programme requires the provinces to improve their own revenue collection and contribute to the country’s overall fiscal framework.
He argued that provinces could no longer depend primarily on their guaranteed shares from the federal divisible pool while making limited efforts to expand their own tax bases.
As an example, Schehzad pointed to legislation passed by all four provincial assemblies last year to implement agricultural income tax. The measure was a structural benchmark under Pakistan’s IMF programme and, according to the adviser, demonstrated progress on commitments to strengthen provincial revenue mobilisation.
The federal government is also expecting improved receipts from its recently announced retail tax scheme. Schehzad expressed confidence that the collection target under the initiative would be achieved.
The broader challenge, however, remains the distribution of fiscal responsibility between the federation and the provinces. While federal transfers remain central to provincial finances, the government’s current approach seeks to make provinces more responsible for raising revenue from economic activities falling within their own taxation powers.
With the IMF review approaching, both federal and provincial revenue performance will remain important to Pakistan’s efforts to meet its fiscal commitments and maintain stability under the programme.
