Pakistan Faces Fiscal Strain as FBR Revenue Shortfall Hits Rs 198 Billion

Karachi: Pakistan is grappling with a significant fiscal challenge as the Federal Board of Revenue (FBR) reported a substantial revenue shortfall of approximately Rs 198 billion in the first quarter of the fiscal year 2026. Mian Zahid Hussain, a prominent business leader, has warned that this shortfall reflects deeper structural fiscal issues and poses a potential threat of mid-term tax impositions.

Despite meeting its revenue target in July, the FBR fell short by Rs 64 billion in August and Rs 138 billion in September. The cumulative revenue collection for the quarter totaled Rs 2,885 billion against a target of Rs 3,083 billion. Mian Zahid Hussain, who holds multiple influential positions in the business community, acknowledged the FBR’s efforts but pointed out the persistent failure to broaden the tax base.

While the income tax target was missed by Rs 96 billion, and the sales tax by Rs 122 billion, both categories showed year-on-year increases of 11% and 13%, respectively. Customs duties exceeded expectations by Rs 17 billion due to increased imports, though this has further strained the current account deficit. Hussain emphasized the need for import substitution and consistent business-friendly policies to stabilize the fiscal trajectory.

A major concern highlighted by Hussain is the rampant non-compliance among affluent individuals, undermining fiscal sustainability. He criticized the large number of tax returns declaring zero taxable income despite visible affluence and warned that this non-compliance jeopardizes the country’s ability to meet International Monetary Fund (IMF) benchmarks.

The revenue gap is further exacerbated by unfunded flood-related expenditures and provincial governments’ failure to deliver promised budget surpluses to the federal government. This fiscal pressure coincides with technical-level talks for the IMF’s Second Review under the 37-month, US$ 7 billion Extended Fund Facility (EFF).

Mian Zahid Hussain cautioned that if the necessary additional revenue does not materialize soon, the government might be compelled to impose emergency taxes mid-year. Such measures would negatively impact industry and the public, placing the burden of tax evasion on compliant taxpayers.