The International Monetary Fund (IMF) has warned that escalating regional tensions could pose a serious threat to Pakistan’s economic recovery, potentially dampening investor confidence and slowing growth.

During the ongoing economic review talks, IMF officials also proposed new taxes on fertilizers and pesticides to bridge a Rs200 billion shortfall in the first quarter.

IMF officials, in discussions with Pakistani authorities, expressed concern that heightened regional tensions may disrupt external stability. They cautioned that such developments could increase uncertainty for foreign investors and put pressure on commodity prices — both of which may slow down economic momentum.

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According to IMF representatives, “uncertain global conditions, coupled with regional instability, could weaken investor sentiment and affect Pakistan’s external sector.”

Possible tax hikes

The IMF urged the government to take immediate fiscal measures to recover the shortfall in the first quarter of the ongoing fiscal year. It proposed raising the excise duty on fertilizers from 5% to 10% and introducing a new 5% duty on agricultural pesticides.

However, sources said the government has requested a one-year extension, citing the financial strain caused by recent floods. Despite the setback, the IMF is pressing for measures to maintain fiscal discipline and meet the annual tax collection target of Rs14,131 billion.