Abdul Ghani

Pakistan has achieved its lowest fiscal deficit in eight years, narrowing it to 5.4% of GDP in FY2025, down from 6.9% in FY2024, according to the Ministry of Finance’s Monthly Economic Update and Outlook for August 2025 exclusively available with Wealth Pakistan.

The report reveals that tax revenues rose 26.2%, while non-tax revenues surged 65.7%, largely due to higher petroleum levies, profits of the State Bank of Pakistan, and dividends from state-owned enterprises.

According to the document, the fiscal balance also benefitted from a sharp rise in the primary surplus, which reached Rs2.7 trillion (2.4% of GDP) — the highest in 24 years. This was a significant jump from the Rs953 billion (0.9% of GDP) recorded in FY2024.

The document mentions that total expenditures increased 18% to Rs24.16 trillion. Current spending grew 15.9% to Rs21.53 trillion, while development expenditure under the federal PSDP surged by 43.3%.

The Ministry said the moderation in current expenditures provided fiscal space to expand development spending, which is essential for growth.

In July 2025 alone, the FBR collected Rs757.4 billion in taxes, marking a 14.8% increase year-on-year. Domestic tax collection rose 12.5%, while customs duty receipts jumped 31.2%.

“Pakistan’s fiscal discipline is a key element in sustaining macroeconomic stability and ensuring space for growth-oriented policies,” the report read.

Economists, however, warn that climate-related shocks such as floods could create unexpected spending pressures, while expanding the tax base remains critical to maintain this momentum.

Credit: INP-WealthPk