ADB’s $200m Tax Digitalisation Loan Gets Conditional Approval

Pakistan has conditionally approved a $200 million loan from the Asian Development Bank (ADB) to support the digitalisation of tax administration, despite concerns from the Planning Commission over the effectiveness of previous foreign-funded tax reforms.

 

The Rs57 billion Transforming and Digitalising Revenue Administration (TADRA) project was among seven schemes worth a combined Rs116 billion cleared by the Central Development Working Party (CDWP).

 

The project aims to raise Pakistan’s tax-to-GDP ratio from 11.1% to 13.5% by 2029 by expanding the taxpayer base, improving compliance and modernising revenue administration.

 

Planning Minister Ahsan Iqbal recommended the project to the Executive Committee of the National Economic Council (Ecnec), but made the approval conditional on a detailed review by the Pakistan Institute of Development Economics (PIDE).

 

The Planning Commission noted that Pakistan has already obtained around $4.7 billion in foreign financing for tax reforms, while the tax-to-GDP ratio has remained close to 11%. It called for an assessment of earlier programmes, including the Tax Administration Reforms Programme, Pakistan Single Window, Integrated Transit Trade Management System and Pakistan Raises Revenue Project.

 

The review is expected to assess the impact and value for money of previous reforms before additional financing is deployed.

 

The ADB financing had already received management-level commitment and now requires formal approval from the bank’s board. The loan will carry a concessional maturity of 25 years, including a five-year grace period, with an annual interest rate of around 1.5% to 2%.

 

The Planning Commission also asked the Federal Board of Revenue (FBR) to demonstrate how the new project aligns with its Rs350 billion Transformation Plan and provide measurable targets for revenue generation, taxpayer expansion and improvements in the tax-to-GDP ratio.

 

The FBR said the project forms part of its 2024–28 transformation programme aimed at accelerating digitalisation, improving operational efficiency, increasing taxpayer compliance and making customs clearance more transparent.

 

However, the Planning Commission called for an impact assessment of existing FBR reforms, a gap analysis, needs assessment and feasibility study before the new intervention moves forward.

 

The CDWP also recommended the Rs37.2 billion PakSat-2 Satellite System for approval by Ecnec, while five other projects worth Rs21.59 billion were approved directly.