Karachi, February 8, 2025 – Pakistan has reported a notable reduction in its budget deficit, which contracted to 1.2% of Gross Domestic Product (GDP) in the first half (July-December) of the fiscal year 2024-25. This marks a significant improvement from the 2.3% budget deficit recorded during the corresponding period of the previous fiscal year.
According to the latest data released by the Finance Ministry on Saturday, the budget deficit has been calculated based on a GDP of Rs 124.15 trillion for the first six months of FY25, compared to Rs 106.045 trillion during the same period in FY24. This contraction in the budget deficit reflects a combination of improved revenue collection and controlled expenditure growth.
Total revenue collected during the first half of the current fiscal year amounted to Rs 9.764 trillion, showing a substantial rise compared to Rs 6.854 trillion in the corresponding period of the previous fiscal year. As a result, the revenue-to-GDP ratio improved to 7.9% from 6.5%. A major contributing factor to the narrowing budget deficit has been a notable increase in tax revenues, which reached Rs 6.667 trillion during July-December FY25, up from Rs 4.834 trillion in the same period last year. Consequently, the tax-to-GDP ratio improved to 4.9%, compared to 4.6% in the previous year.
Additionally, non-tax revenue surged to Rs 3.696 trillion during the first six months of FY25, a sharp increase from Rs 2.02 trillion recorded in the same period last year. This boost in revenue generation has played a crucial role in limiting the budget deficit and ensuring fiscal sustainability.
On the expenditure side, government spending rose to Rs 11.307 trillion in the first half of FY25, compared to Rs 9.262 trillion in the corresponding period of the previous fiscal year. This led to an increase in the expenditure-to-GDP ratio, which stood at 9.1% in the current fiscal year, compared to 8.7% in the previous year. Despite rising expenditures, the government’s effective fiscal management has helped contain the budget deficit.
The contraction in the budget deficit signals improved fiscal discipline and stronger revenue mobilization. However, sustained efforts will be required to maintain this positive trajectory and further reduce the budget deficit in the remaining half of the fiscal year.