Pakistan tax-to-GDP ratio rises 10.8% in FY25 second quarter, below IMF target

A man checks the quality of rice at a grocery shop in Karachi on September 26, 2024. (AFP/File)
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Updated 30 January 2025
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Pakistan tax-to-GDP ratio rises 10.8% in FY25 second quarter, below IMF target

  • Pakistan navigating challenging economic recovery path buttressed by $7 billion IMF program that comes with tough measures 
  • Senate Standing Committee of Revenue expresses concerns over Federal Bureau of Revenue’s handling of sales tax collection

ISLAMABAD: Pakistan’s tax-to-GDP ratio rose to 10.8% in the second quarter of the 2024-25 fiscal year, a statement from the Senate Standing Committee on Finance and Revenue said on Thursday, below the target of 13.6% agreed with the International Monetary Fund (IMF) when it approved a $7 billion bailout loan for the cash-strapped country last year. 
The South Asian nation is navigating a challenging economic recovery path buttressed by the 37-month loan program that comes with tough measures especially on the taxation front, such as broadening the tax base to include previously undertaxed sectors such as agriculture, industrialists, and developers, abolishing exemptions and bringing the retail, agriculture, and export sectors into the normal income tax regime and imposing new taxes on the construction and sale of buildings and plots, and on milk and lubricating oil. 
The bailout has also called for increasing the tax rate on farm income, continuing fiscal consolidation to reduce the deficit and improve fiscal discipline, improving tax administration and compliance, strengthening federal-provincial institutional arrangements and improving public investment management.
“The tax-to-GDP ratio has risen to 10.8% in the second quarter [of FY24-25], up from 9.5% in the first quarter, although it remains below the IMF-agreed target of 13.6% by the end of the program,” said a press release after the Senate Standing Committee on Finance and Revenue met on Thursday. “By comparison, India’s tax-to-GDP ratio stands at 18%.”
During the meeting, the committee was briefed on Pakistan’s current revenue shortfall of Rs384 billion for the first half of the fiscal year. The FBR collected Rs5,624 billion in taxes, falling short of the targeted Rs6,008 billion. 
Senator Saleem Mandviwala, the chair of the committee, expressed concerns over the Federal Bureau of Revenue’s handling of sales tax collection.
Finance Minister Muhammad Aurangzeb responded by highlighting ongoing reforms, including a move to simplify income tax forms for salaried individuals and a push for transparency in tax collection through technological innovations.
Aurangzeb also discussed the government’s intention to separate tax policy from FBR operations in the next financial year, aiming to ease the burden on the salaried class.
“We are taking steps to keep the tax form simple and easy,” he added.
The committee also stressed the need for reforms to reduce the administrative burden on taxpayers while ensuring that tax collection remained “efficient and fair.”
The possibility of converting certain taxes into a carbon tax, a proposal raised by Senator Sherry Rahman, was also discussed. 
“While the finance minister acknowledged the World Bank’s 10-year $20 billion Country Partnership Framework, which includes climate and carbon concerns, some members, including Senator Farooq H. Naik, raised concerns about the impact of a carbon tax on inflation and its effect on the poor,” the statement said. 
Under the IMF deal, the highest effective tax rate on farm income can rise to as much as 45% from the current 15%. It will be implemented from this year, a move that was termed “unprecedented” by brokerage and investment banking firm JS Global at the time the loan was approved last year.
“These changes could contribute to inflation, particularly in food prices, affecting consumers nationwide,” said Ghasharib Shaokat, head of product at Pakistan Agriculture Research, adding that larger farmers will be affected more.
Inflation averaged close to 30% in FY23 and 23.4% in FY24, which ended on June 30. The consumer inflation rate slowed to 4.1% year on year in December, the lowest in more than 6.5 years.
Prime Minister Shehbaz Sharif’s government is based on a weak coalition and faces political pressure from the party of popular jailed opposition leader, former premier Imran Khan.
But Sharif says his government is committed to the tough but unavoidable reforms mandated by the IMF. 
Pakistan has been struggling with boom-and-bust cycles for decades, leading to 22 IMF bailouts since 1958.


Separated twice: An Afghan man’s life in Pakistan and the fear of losing home again

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Separated twice: An Afghan man’s life in Pakistan and the fear of losing home again

  • Lost as a child in Peshawar, Mohammad Rahim Khan built a life in Pakistan but remains undocumented
  • Deportation drive of ‘illegal’ foreigners exposes legal gaps around adoption, marriage, refugee status

ISLAMABAD: Mohammad Rahim Khan was five years old when he last saw his mother.

It was at the Hajji Camp bus stop in Pakistan’s northwestern city of Peshawar, more than four decades ago. His mother, an Afghan refugee fleeing war, had brought him across the Tari Mangal border in Kurram district and into Pakistan. While waiting at the crowded terminal, Khan wandered to a nearby toy shop. When he returned, she was gone.

He searched for her for two days. She never came back.

A local shopkeeper, Ali Muhammad, took pity on the child and brought him home, promising to help find his family. The temporary shelter became permanent. Khan grew up in Pakistan, adopted informally into the household, and never returned to Afghanistan.

Now 45, he lives on the outskirts of Islamabad in a modest two-room house, working as a daily wage laborer. But a nationwide deportation drive launched by Pakistan in 2023 has placed his entire life under threat.

Since November 2023, authorities have deported nearly 2 million Afghan nationals, targeting those without legal documentation. Khan, who has remained undocumented throughout his adult life, fears he may soon be among them.

“I spoke to my lawyer that I am very worried,” Khan told Arab News. “I love Pakistan.”

A FAMILY WITHOUT PAPERS

Ali Muhammad later married Khan to his daughter, Gul Mina. Together, they have six children, four daughters and two sons. Yet despite decades in Pakistan, Khan’s Afghan nationality continues to shadow the family.

Khan never held an Afghan refugee card, Afghan Citizen Card (ACC), Proof of Registration (POR), or any other formal documentation. His family assumed for decades that his informal adoption, marriage to a Pakistani citizen, and long residence would provide sufficient legal standing. They only sought legal advice when the deportation drive began threatening separation.

Without a Pakistani national identity card, his children cannot obtain Form-B, the birth registration document required for school enrolment.

“They [children] are told to get a Form-B,” Gul Mina told Arab News. “Otherwise, they will not go to school.”

Three of their daughters were forced to leave school after eighth grade.

Healthcare has also been affected. When Khan’s 13-year-old son, Ehsanullah, fractured his arm, a public hospital refused to issue a registration card without identity documents.

“Then I went to a [private clinic] in Chak Shahzad and got my treatment there,” Khan said.

The family has petitioned the Islamabad High Court to block his deportation. Lawyers say the case highlights how thousands of long-term residents fall through legal cracks created by Pakistan’s citizenship, refugee and documentation framework.

LEGAL GREY ZONE

Pakistan does not legally recognize Western-style adoption. Instead, it uses a guardianship system under the 1890 Guardians and Wards Act, aligning with Islamic principles that preserve lineage, so adopted children don’t inherit or change their family name but receive care, education and welfare through court-appointed guardianship.

“Because we don’t have a legal pathway for adoption per se, the adopted child does not get citizenship of the adopting parents automatically,” said Advocate Umer Ijaz Gillani, a legal expert on citizenship.

Years earlier, Khan’s father-in-law had offered to register him as his biological son to obtain identity documents, but Khan refused, calling the move fraudulent. Because Khan later married his father-in-law’s daughter, both he and his wife cannot legally list the same person as their father on official records, leaving them without a lawful workaround.

Marriage offers no certainty either. Pakistan’s Citizenship Act of 1951 grants citizenship to foreign women married to Pakistani men, but is silent on foreign husbands married to Pakistani women.

While higher courts have, at times, ruled in favor of such men, implementation has been inconsistent. In October 2025, the Supreme Court struck down a high court order that had directed authorities to grant citizenship to an Afghan man married to a Pakistani woman.

Even the Pakistan Origin Card (POC), a long-term residency document, remains difficult to secure.

“We have experienced that in the case of especially Afghan men who marry Pakistani women, the government authorities are often reluctant to recognize this right,” Gillani said.

According to submissions made by government officials in court, authorities have received at least 117 applications for nationality from Afghan men married to Pakistani women following directives issued by the Peshawar High Court, reflecting a broader pattern rather than isolated cases.

‘NO RELAXATION’

Officials say the deportation policy allows no exceptions.

“No relaxation has been granted by the government, including for those who’ve married to Pakistani citizens,” said Asmatullah Shah, the chief commissionerate for Afghan refugees.

“If they want to live here, they should go back and apply for a visa and then they can come here with valid documentation.”

Legal experts note that deportation would send Khan to Afghanistan despite having no known relatives there, and that returning legally would require obtaining an Afghan passport and a Pakistani visa, costs far beyond the means of a daily wage laborer.

For Khan’s mother-in-law, Husn Pari, who raised him for decades as her own son, the prospect is devastating.

“When I am not able to meet [Khan] for one day, my day does not pass,” she said. “His own mother, how much pain must she be in?”

For Khan, the fear of deportation echoes the trauma of his childhood.

“Before I was separated from my first mother,” he said. “The second time I will be separated from my second mother. This is very difficult for me.”