Karachi, August 5, 2025 – In a significant fiscal milestone, Pakistan has posted its lowest fiscal deficit in nine years, clocking in at 5.38% of GDP during the fiscal year 2024-25 (FY25).
The sharp improvement is attributed to a remarkable surge in both tax and non-tax revenues, outpacing the growth in expenditures.
According to a detailed analysis by Topline Securities Limited, Pakistan’s fiscal deficit of 5.38% was notably below the government’s revised estimate of 5.6%, which itself had been trimmed from an initial budgeted target of 5.9%. The International Monetary Fund (IMF) had also projected the deficit at 5.6%, underscoring the country’s better-than-expected fiscal performance.
Revenues saw a robust 36% year-on-year (YoY) growth, with non-tax revenues surging 66%, largely due to a hefty dividend of Rs2.62 trillion from the State Bank of Pakistan (SBP). This was a major leap from Rs0.97 trillion recorded in FY24, driven by elevated interest rates and an expanded SBP balance sheet.
Meanwhile, tax revenues grew 26% YoY, led by the Federal Board of Revenue (FBR), whose collections—including the Petroleum Development Levy (PDL)—rose significantly. FBR’s revenue has grown 3.02 times over the past five years, from Rs4.3 trillion in FY20 to Rs12.9 trillion in FY25. During the same period, Pakistan’s GDP expanded from Rs41 trillion to Rs114.6 trillion—an increase of 2.75 times.
As a result, the tax-to-GDP ratio has reached an impressive 11.3% in FY25, a seven-year high. This compares favorably with 9.7% in FY24 and an average of 9.9% over the last five years. Analysts note that including the PDL in the tax calculation reflects the government’s shift away from sales tax, possibly to avoid revenue sharing with provinces.
The primary balance—a critical measure excluding interest payments—stood at a surplus of 2.4% of GDP, the highest in over two decades. This reflects effective fiscal discipline, as revenue growth outpaced spending. Both the government and IMF had forecast a lower surplus of 2.2% and 2.1% respectively.
Debt servicing has also improved. Interest expenses as a percentage of FBR revenues fell to 76% in FY25 from 88% in the previous year, owing to restrained 9% growth in interest costs supported by declining interest rates.
The Public Sector Development Program (PSDP) spending rose to 2.6% of GDP—its highest level in five years—though still shy of the 5% peak achieved in FY17.
Looking ahead, Pakistan is projected to record a third consecutive primary surplus in FY26, a rare achievement after two decades of deficits. The fiscal deficit is forecasted to further narrow to 4.0–4.1% of GDP, potentially marking the lowest fiscal deficit in 20 years, underscoring Pakistan’s ongoing commitment to fiscal consolidation.