The Asian Development Bank (ADB) has announced an additional $200 million loan to help Pakistan modernize its revenue administration, while urging the country to broaden its narrow tax base and improve tax compliance.
ADB Vice President for South, Central and West Asia Yingming Yang said the bank’s Transforming and Digitalising Revenue Administration Project is expected to be considered by its board this year.
The project will support the Federal Board of Revenue’s transformation agenda through investment in digital infrastructure, modern tax and customs systems, advanced data analytics, artificial intelligence based compliance tools, stronger cybersecurity and institutional development.
Speaking at a Dialogue on Tax and Fiscal Sustainability in Pakistan on Thursday, Yang said Pakistan had made significant progress in restoring macroeconomic stability and strengthening economic resilience. He said the next stage of reforms would depend on the country’s ability to mobilize domestic resources more efficiently and fairly.
Yang said Pakistan’s tax reform agenda was gaining momentum, with the Prime Minister’s FBR Transformation Plan and new tax operating model providing a foundation for a more modern and technology driven revenue system focused on taxpayers.
He said successful implementation could improve tax compliance, taxpayer services and the use of integrated data while reducing discretionary interventions. A more risk based approach could also help the FBR improve revenue collection.
The ADB official said stronger domestic revenue should not be viewed only as a fiscal target, as higher collections would give the government more room to invest in people, infrastructure and public services while strengthening economic resilience and reducing reliance on debt and external financing.
He identified Pakistan’s narrow tax base, widespread informality and low compliance as key challenges, while highlighting the ADB’s efforts to broaden the tax base, improve tax policy and strengthen public financial management.
He also welcomed the Tax Policy Office, saying it could support evidence based policymaking and a fairer tax system with fewer exemptions and lower compliance costs.
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