The International Monetary Fund (IMF) has proposed stringent new tax measures that could hit Pakistan’s agricultural sector hard. In recent budget discussions, the IMF demanded an increase in Federal Excise Duty (FED) on fertilizers from 5% to 10%, along with a new 5% tax on agricultural pesticides. This move could extract an additional 30-40 billion rupees from farmers’ pockets at a time when the sector is already struggling.
Prime Minister Shehbaz Sharif and his economic team are reportedly resisting these measures, arguing that such taxes would cripple an already vulnerable agricultural economy. Their opposition comes as Pakistan prepares to implement Agriculture Income Tax (AIT) starting July 1, 2025, which is expected to generate 40-50 billion rupees for provincial governments.
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The tension was evident during Wednesday’s meeting between IMF Middle East Director Jihad Azour and Finance Minister Muhammad Aurangzeb. While the IMF insists on these revenue measures as part of its program conditions, Pakistani officials are fighting to protect farmers from what they see as excessive taxation, especially when new income taxes on agriculture are being introduced.
This standoff highlights the difficult balance Pakistan must strike between IMF demands and domestic economic realities. With agriculture contributing nearly 24% to GDP and employing 38% of the workforce, additional input taxes could have far-reaching consequences on food prices and rural livelihoods.
