KARACHI: Pakistan intends to increase its tax-to-gross domestic product ratio from the existing 10.2 percent to 11 percent this year, Finance Minister Muhammad Aurangzeb said on Thursday, as Islamabad pushes for economic reforms.

Pakistan has lately introduced several reforms to ensure economic stability and to meet structural benchmarks under a $7 billion International Monetary Fund (IMF) program Islamabad secured last year.

The South Asian country has one of the lowest tax-to-GDP ratios in the region, despite a population of more than 240 million, and has often failed to meet its tax collection targets.

Speaking at the Atlantic Council in Washington, Aurangzeb outlined initiatives to bring agriculture, retail and real-estate sectors into the tax net, improve compliance through technology and AI-driven analytics.

“He reaffirmed the government’s commitment to raise the tax-to-GDP ratio from 10.2 percent to 11 percent this year, and to 13 percent over the medium term, ensuring fiscal sustainability,” the Pakistani finance ministry said.

In June, Prime Minister Shehbaz Sharif’s government set a record-high tax collection target of Rs14.13 trillion ($47.4 billion) for the fiscal year 2025–26, marking a 9 percent increase from the previous year. Officials say meeting this goal is essential to reducing reliance on external debt and ensuring long-term fiscal sustainability.

Since then, the prime minister has approved modern digital ecosystem for the revenue watchdog to increase its collection and the launch of simplified digital tax returns to increase compliance and widen the country’s narrow tax base.

Pakistan’s economy has lately shown some signs of stabilization under a $7 billion IMF bailout. The program helped ease fears of default, strengthen foreign reserves and stabilize the rupee after two years of severe fiscal stress.

Inflation has eased from record highs, and the government is moving ahead with privatization, tax and energy reforms, and digitalization drives, all aimed at restoring credibility among investors and lenders.

The finance minister said the government’s disciplined fiscal management has restored confidence, improved sovereign spreads and contributed to the first current account surplus in 14 years.

“On monetary and exchange rate policy, Senator Aurangzeb reaffirmed the government’s commitment to maintaining a competitive, market-based exchange rate under the oversight of the State Bank of Pakistan, adding that productivity gains and structural reforms are as vital as external price competitiveness in sustaining export growth,” the finance ministry said.