ISLAMABAD: The International Monetary Fund (IMF) has urged Pakistan to accelerate structural reforms, broaden its narrow tax base and ensure equitable burden-sharing, stressing that low tax-to-GDP ratio and largely untapped revenue potential in agriculture, real estate and provincial services taxation are undermining the state’s capacity to finance development and public services.
Dr Mahir Binici, IMF Resident Representative in Pakistan, said the country was at a historical juncture where the focus must shift from macroeconomic stabilisation towards economic transformation through faster implementation of reforms, stronger institutions and fairness in distributing their costs and benefits.
Speaking at the closing session of a conference organised by the Sustainable Development Policy Institute (SDPI) on economic reforms and growth, Binici said the pace of reform implementation was critical, as the window of opportunity could narrow amid an increasingly volatile domestic and international environment.
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He identified three essential requirements for sustaining the reform process: accelerating implementation, strengthening institutions and ensuring fairness so that the burden of reforms was shared equitably, vulnerable households remained protected and the benefits became visible to the public.
“These reforms can only be durable and deliver dividends if the burden is shared, vulnerable households are protected and the benefits are visible,” he emphasised.
Binici said Pakistan had already made significant progress in restoring macroeconomic stability, but the challenge now was to consolidate these gains and move towards stronger investment, productivity, exports and employment generation.
He stressed that reforms must be properly sequenced and targeted to ensure that economic transformation translated into tangible improvements in living standards.
The IMF representative said emerging and developing economies such as Pakistan needed revenue mobilisation of at least 15 percent of GDP to build the capacity required to deliver public services and improve living standards. Pakistan, however, remained considerably below this threshold.
He emphasised that the country needed a broader, simpler, fairer and more predictable taxation system, stressing that revenue mobilisation should not remain an end in itself but create fiscal space for investment in human capital, infrastructure and productive sectors.
On provincial revenue mobilisation, Binici stressed the need for harmonisation of the General Sales Tax (GST) on services, describing it as an important area where provincial governments could generate additional revenues.
He said although provinces received a share of federal tax collections, they also needed to strengthen their own revenue mobilisation efforts.
He identified agricultural income and property taxation, particularly in the real estate sector, as major untapped sources of provincial revenue, stressing that significant potential remained for expanding the tax base in these areas.
The IMF representative also emphasised better monitoring, spending efficiency and allocation of scarce resources, particularly at the provincial level, saying every rupee of available fiscal space must be directed towards areas generating the greatest social and economic impact.
He said improved governance, national tariff policy and a better business environment were critical to unlocking Pakistan’s growth potential.
Binici also called for directing public spending towards high-return infrastructure, healthcare, education and targeted social protection, while ensuring that private-sector credit and capital flowed towards productive businesses rather than protected and preferential activities.
Highlighting human capital development, he said increasing health and education expenditure as a share of GDP and strengthening social protection were among the programme’s important objectives.
He noted that combined health and education spending had increased from around 2 percent of GDP over the past two years, with the objective of raising it to approximately 2.8 to 3 percent during the current fiscal year. However, allocations remained substantially below Pakistan’s requirements and spending levels in peer economies.
On the cost of doing business, Binici said high energy costs, taxation and multiple layers of taxes were discouraging businesses from maintaining existing investments, undertaking new projects and attracting foreign direct investment.
He supported ongoing energy sector reforms, including tariff adjustments, improved governance of distribution companies and greater private-sector participation through privatisation to improve efficiency, service delivery and energy security.
Binici said Pakistan needed to seize the present opportunity through faster implementation of structural reforms, stronger institutional capacity and protection of vulnerable segments of society to secure durable and inclusive economic growth.
Copyright Business Recorder, 2026
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