ISLAMABAD, September 8, 2026: The federal government is considering proposals to introduce a new local tax in Islamabad if the capital is granted autonomous-unit status, with the revenue intended to finance basic services and administrative infrastructure within the federal capital.
The proposals are expected to come under discussion during Pakistan’s upcoming fifth review talks with the International Monetary Fund (IMF) under the Extended Fund Facility (EFF), according to sources.
Under the initial proposals, revenue generated through the tax would be spent within Islamabad on hospitals, schools, colleges, other educational institutions, welfare initiatives and administrative infrastructure.
Sources said the final revenue estimate for the proposed tax has yet to be determined. The proposed system is aimed at creating fiscal capacity for Islamabad while establishing a mechanism for collecting and allocating local resources.
The Federal Board of Revenue (FBR) is expected to prepare the initial tax proposals. These would then be submitted to a subcommittee formed to examine taxation arrangements linked to the proposed autonomous status of Islamabad.
After approval by the relevant subcommittee, the proposals would be placed before a committee headed by the planning minister. If approved there, they would be submitted to Prime Minister Shehbaz Sharif before being taken up with the IMF for approval and a final decision.
The proposed tax could be introduced in the next fiscal year’s budget, sources said.
IMF review to cover wider economic reforms
The proposed Islamabad tax is expected to form part of broader discussions during the IMF’s fifth review of Pakistan’s ongoing loan programme.
The Finance Ministry has directed relevant ministries and institutions to compile the data and reports required for the upcoming review talks, according to sources.
The talks are expected to cover structural benchmarks and economic reform targets, while reforms in the energy sector will also remain an important part of the agenda.
Targets related to circular debt in the electricity and gas sectors are also expected to be discussed during the negotiations.
Sources said successful completion of the review could pave the way for the release of the programme’s fifth tranche, with Pakistan expected to receive around $1 billion.
An additional $200 million could also be provided to help address losses caused by climate change, bringing the potential total disbursement to $1.2 billion if the review is completed successfully.
Sources said the proposed roadmap also includes developing a new system for the use of local taxes and distribution of resources in Islamabad.
Alongside the proposed administrative framework, efforts are being made to coordinate fiscal arrangements and improve the effectiveness of the tax system, with recommendations from the IMF also expected to be incorporated.