IMF agreed to spare agriculture sector from taxes, says PM Shehbaz

Prime Minister Shehbaz Sharif on Wednesday said the government successfully convinced the International Monetary Fund (IMF) to exempt Pakistan’s agriculture sector from taxation, despite persistent demands from the global lender.

“We informed the IMF that the government will not impose any tax on the agriculture sector, including fertiliser and pesticide. I am happy to convey that the IMF, despite its insistence, agreed to our terms,” said PM Shehbaz, while addressing the federal cabinet meeting.

He said that the agriculture sector is “already under pressure” in Pakistan, thus protecting it was necessary.

The prime minister shared that the salaried class earning between Rs 600,000-1.2 million will pay 1% income tax annually, as compared to 5% imposed in FY25. Whereas, the salaries of government employees have been raised by 10%.

However, this contrasts with an earlier announcement by Finance Minister Muhammad Aurangzeb, who, during his budget speech for FY26, stated that the tax rate for this slab will be 2.5% income tax, contrary to 1% mentioned in the Finance Bill 2025.

Last week, Pakistan unveiled its federal budget 2025-26 “for a competitive economy”, targeting a modest 4.2% growth for the coming fiscal year, compared to 2.7% expected in the outgoing FY25.

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Addressing the cabinet, PM Shehbaz also touched on rising regional tensions, saying that the government increased its fiscal space to meet the country’s defence needs amid ongoing tensions with India.

“It is a dire need of the time,” he said.

Similarly, the government has allocated Rs1 trillion under the Public Sector Development Programme (PSDP). “We need to honour commitments made with our partners,” the PM said.

He said that Pakistan has successfully averted a sovereign default and is now moving ahead on a sustainable path.