IMF Revenue Target Raises Cost Pressures, Warns Pakistan Industrial and Traders Associations Front

Faheem Saigol says Pakistan risks industrial slowdown amid rising taxes and energy costs
By Dr Ansab Ali | Lahore, Pakistan
LAHORE: Pakistan Industrial and Traders Associations Front (PIAF) has expressed concern over the International Monetary Fund’s projected federal revenue target of Rs17.1 trillion for 2026–27, warning that aggressive revenue mobilisation measures, coupled with high energy tariffs and policy pressures, could further strain industrial growth and exports.
PIAF Chairman Faheemur Rehman Saigol, who is also President of the Lahore Chamber of Commerce and Industry (LCCI), along with Senior Vice Chairman Nasrullah Mughal and Vice Chairman Tahir Manzoor Chaudhry, said the economic framework outlined in the IMF staff report reflects increasing reliance on taxation, petroleum levies and utility price adjustments, placing additional burden on the productive sectors of the economy.
The IMF has projected federal revenues at Rs17.145 trillion for FY2026–27, more than Rs2 trillion higher than the current fiscal year, alongside an 18 percent increase in the petroleum levy target to Rs1.73 trillion. The report also proposes Rs430 billion in additional budgetary measures and similar revenue mobilisation efforts by the provinces.
PIAF leaders said these fiscal targets, when combined with rising electricity and gas prices, would significantly increase the cost of doing business in Pakistan at a time when regional competitors are offering lower input costs to attract investment.
PIAF Chairman Faheemur Rehman Saigol noted that Pakistan’s industrial sector is already facing some of the highest energy tariffs in the region, with effective electricity costs in many cases exceeding Rs38 to Rs48 per unit after taxes, fuel adjustments and surcharges. Any further increase in petroleum levies and energy pricing mechanisms, he warned, would further erode export competitiveness.
Saigol also pointed out that the IMF’s emphasis on full cost recovery in the power and gas sectors, along with reduction in subsidies, would likely result in higher utility bills for industries unless accompanied by deep structural reforms in the energy sector.
PIAF leadership said Pakistan’s industrial base is already under pressure from high capacity payments to Independent Power Producers (IPPs), rising circular debt and dollar-indexed energy contracts, which together contribute significantly to the country’s elevated electricity tariffs.
According to recent official data, Pakistan’s annual payments to IPPs have reached around Rs3.4 trillion, with nearly half of the average electricity tariff attributed to capacity charges. Business leaders argue that this structure has created a situation where consumers pay heavily even for unused electricity capacity.
They said that instead of relying primarily on higher taxes and levies, the government should focus on reducing production costs through energy sector reforms, renegotiation of inefficient contracts, and improving transmission and distribution efficiency.
Faheemur Rehman Saigol said Pakistan’s industry cannot sustain long-term growth under continuous fiscal tightening and rising input costs. He stressed that the manufacturing sector is the backbone of exports, employment and tax generation, and weakening it would ultimately undermine overall economic stability.
Senior Vice Chairman Nasrullah Mughal and Vice Chairman Tahir Manzoor Chaudhry added that frequent increases in petroleum levy targets, combined with rising utility tariffs, are pushing production costs beyond regional benchmarks, making Pakistani exports less competitive in global markets.
They noted that regional economies are focusing on reducing energy and financing costs for industry, while Pakistan is moving in the opposite direction due to fiscal constraints and external programme commitments.
PIAF further warned that while revenue mobilisation is necessary for macroeconomic stability, excessive reliance on indirect taxation and energy price adjustments could slow down industrial output, reduce investment and increase unemployment pressures.