KEY POINTS
- Pakistan posts 9-year low budget deficit in FY25
- PKR 6,854 billion transferred to provincial governments under NFC award
- PM Shehbaz Sharif lauds increase in tax-to-GDP ratio
ISLAMABAD: Pakistan has narrowed its budget deficit to 5.4 percent of GDP in the fiscal year 2024–25, down from 6.8 percent in the previous year, according to the Ministry of Finance.
According to data released by the Ministry of Finance, Pakistan’s budget deficit for the fiscal year 2024–25 stood at PKR 6,168 billion, the lowest level recorded in nine years.
Overall, total revenues of PKR 17,997 billion fell short of expenditures amounting to PKR 4,165 billion.
Tax revenues remained the primary source of government funding. The Federal Board of Revenue (FBR) collected PKR 11,744 billion, while provincial governments contributed PKR 978 billion.
Combined, total tax revenues reached PKR 12,722 billion. In addition, non-tax income provided PKR 5,274 billion, helping to bolster the government’s fiscal position.
Expenditure breakdown
On the expenditure side, interest payments continued to be the largest component, totaling PKR 8,887 billion. Defence spending was the second-largest outlay at PKR 2,193 billion.
A significant PKR 6,854 billion was transferred to provincial governments under the National Finance Commission (NFC) Award to support regional development and public services.
Other major expenditures included PKR 1,513 billion allocated for grants, PKR 1,297 billion for subsidies, and PKR 910 billion for pension payments.
These allocations reflect the government’s attempt to balance economic priorities with social welfare and development goals.
Encouragingly, the country recorded a primary surplus of PKR 2,719 billion. This means that before accounting for interest payments, the government’s revenues exceeded its non-interest spending — a positive sign for future fiscal stability.
Looking ahead, Pakistan is expected to post its third consecutive year of primary surpluses in FY26, marking the lowest fiscal deficit in two decades, projected at 4.0-4.1 percent of GDP.
PM Shehbaz Sharif lauds rise in tax-to-GDP ratio
Prime Minister Shehbaz Sharif has expressed satisfaction over the improvement in Pakistan’s tax-to-GDP ratio, attributing the progress to ongoing reforms within the Federal Board of Revenue (FBR), state media reported.
Chairing a weekly review meeting on FBR reform initiatives in Islamabad on Tuesday, the Prime Minister reaffirmed his full support—and that of the federal government—for the continued implementation and protection of these reform measures.
He directed authorities to ensure the timely and complete execution of reforms by removing bureaucratic hurdles and institutional inefficiencies.
Stressing the importance of consistency, he called for the uniform enforcement of newly introduced customs clearance reforms nationwide.
Prime Minister Sharif highlighted the critical role of technology in streamlining customs procedures, noting that its effective use should substantially reduce processing times and increase overall efficiency.
He also urged both federal and provincial governments to maintain close coordination and adopt a unified strategy to sustain recent gains in tax collection.
Emphasising the importance of compliance, he stated that the effective enforcement of existing taxes would be key to further strengthening revenue performance in the upcoming fiscal year.
He directed the development of a comprehensive strategy, formulated in consultation with the FBR, relevant federal institutions, and provincial governments, to further improve the tax-to-GDP ratio.
He also affirmed that no changes will be made to the approved timeline for FBR’s tax collection and other reform targets for the upcoming fiscal year.
