The Pakistani federal government is planning a 2026-27 budget centered on heavy new taxes and cuts to petrol and diesel subsidies.

These measures are designed to satisfy International Monetary Fund conditions and close fiscal deficits. However, the reliance on increased taxation may intensify existing inflation pressures for citizens across the country.

According to reports, the IMF has requested that Pakistan raise an additional Rs 500 billion [2] through the implementation of new taxes. This push for revenue comes as the government works to align its fiscal policy with the requirements of its current IMF programme [1].

The overall size of the budget may exceed Rs 17 trillion [1]. To stabilize the economy, the government has developed a shadow budget that aims for a zero fiscal deficit [3]. This approach seeks to balance spending with revenue to avoid further borrowing.

While the government moves forward with these plans, the strategy has met resistance from the private sector. Business leaders said the government should avoid heavy-handed taxation on the formal sector, arguing that such measures could stifle economic growth [4].

Despite these concerns, the government intends to proceed with subsidy reductions. The cuts to fuel subsidies are expected to be a primary driver in reducing the deficit, though they often lead to higher transport and commodity costs for the general public [1].

Negotiations regarding the final figures continued through May 2026 as officials in Islamabad finalized the framework for the upcoming fiscal year [2].

“The IMF has asked Pakistan to raise an additional Rs 500 billion through new taxes.”

The push for a zero-deficit budget indicates a strict adherence to IMF austerity measures. By prioritizing revenue generation through the formal sector and subsidy removal, the government is attempting to signal fiscal discipline to international creditors. However, this creates a precarious balance between achieving macroeconomic stability and risking a social backlash due to the resulting inflationary pressure on the public.