Islamabad: Pakistan is preparing to unveil its Federal Budget for the fiscal year 2027 on June 5, 2026, with a focus on fiscal consolidation and maintaining a primary surplus for the fourth consecutive year. The government aims to improve the tax-to-GDP ratio by 50-60 basis points, aligning with stringent IMF guidelines that have upgraded the floor on Federal Board of Revenue (FBR) revenues to Quantitative Performance Criteria (QPC).

According to JS Global, the IMF has set an ambitious target for FBR revenues at Rs15.3 trillion, marking a 14% increase over the revised FY26 collection target. However, challenges loom as the FY26 collection is expected to fall short by Rs200-250 billion. Despite this, the government is considering tax relief for the salaried class and corporate sector, potentially increasing the new tax requirement by over Rs200 billion.

The FBR's tax revenue growth for FY26 was the lowest in six years at 14%, compared to an average of 24% in the previous five years. For FY27, the growth target remains at 14%, slightly above the nominal GDP growth target of 13%. The IMF has also introduced new revenue targets of 0.6% of GDP, totaling Rs860 billion, with federal and provincial governments sharing the burden equally.

The FBR aims to implement a transformation plan to enhance revenue collection, including measures such as tax audits, improved sales tax calculations, and recoveries from sectors like sugar and tobacco. The FY27 tax strategy will focus on closing loopholes and scrutinizing non-compliant taxpayers, though enforcement challenges persist.

Relief measures under consideration include adjustments to salary tax exemptions, rationalization of taxes on ultra-high-temperature (UHT) milk, and continued housing finance subsidies. The government also aims for a GDP growth target of 4.1% and inflation at 8.5% for FY27, while the IMF projects slightly lower figures.

The upcoming budget is expected to have a neutral impact on the stock market in the short term, but a stable economic roadmap could positively influence market sentiment in the medium term. The Capital Market Development Council is exploring incentives to boost market participation, which could further bolster investor confidence.

JS Global maintains its index target of 203,000 for December 2026, but warns that unresolved geopolitical tensions and high oil prices could lower the target to 187,000.