By Staff Reporter
ISLAMABAD: The International Monetary Fund (IMF) has refused to entertain the Federal Board of Revenue’s (FBR) request to reduce transaction taxes for the property sector, dashing earlier claims of an agreement in principle, local media reported.
Senior officials had previously asserted that the IMF had tentatively agreed to lower the withholding tax on property purchasers by 2 percent from 5 percent, effective April 1, 2025, subject to written approval from the Fund.
However, the IMF has now officially clarified that no such commitment was made.
“The IMF has not agreed on a lower withholding tax on property transactions and on lowering March 2025 targets,” the IMF’s Resident Chief in Pakistan, Mahir Binci, said in a statement.
The decision is a setback for the country’s property sector, a vital economic engine employing millions in construction and related industries. Without tax relief, high transaction costs could slow property sales, discourage investment, and deepen affordability challenges for middle-class families aspiring to own homes, potentially driving more deals into the untaxed informal market.
In addition to rejecting the property tax proposal, the IMF has also turned down previous FBR requests to reduce tax rates for the tobacco and beverages sectors, marking a consistent stance against tax relief measures.
The FBR had proposed reducing the 65 percent federal excise duty on tobacco and the 13.5 percent tax on beverages, arguing that lower rates could increase legal sales and curb smuggling, which accounts for roughly 30 percent of the tobacco market. However, the IMF’s refusal aligns with its emphasis on fiscal discipline, even as it may sustain high costs for consumers and businesses.
Despite these refusals, Pakistan and the IMF are advancing towards a Staff Level Agreement (SLA). Finance Minister, Muhammad Aurangzeb, expressed optimism about the negotiations last Friday, stating that both parties are on track to finalize a Staff Level Agreement soon.
Under the $7 billion Extended Fund Facility (EFF), a key condition requires Pakistan to provide written assurances that its provinces will halt wheat procurement—a practice the IMF sees as distorting markets and straining budgets.
For rural farmers and traders in Punjab and Sindh, this could stabilize wheat prices but reduce government support, affecting livelihoods and food supply chains.
On a more positive note, the IMF has signaled its willingness to bolster the EFF with additional climate finance under the Resilience and Sustainability Facility (RSF).
This funding, expected to reach up to $1 billion, awaiting approval from the IMF’s Executive Board alongside the second EFF tranche, could support critical projects—such as rebuilding schools and homes damaged in the 2022 floods or enhancing irrigation—to bolster Pakistan’s resilience against climate change.
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