Fiscal Deficit Falls to 5.4% of GDP; Achieves Second Consecutive Primary Surplus

Karachi: The Finance Division has announced a significant improvement in Pakistan’s fiscal health for the financial year 2025, reporting a budget deficit of 5.4% of Gross Domestic Product (GDP). This marks a decrease from the previous year’s 6.8% deficit, reflecting a 14% year-on-year decline. The country also recorded a second consecutive primary surplus, amounting to 2.4% of GDP, surpassing the International Monetary Fund’s (IMF) target of 2.1%.

In a detailed report of the fiscal accounts, total revenues showed a substantial increase of 36% compared to the previous year. The rise was mainly driven by a 26% growth in tax revenue and a notable 66% increase in non-tax revenues. Direct taxes and sales tax grew by 28% and 26%, respectively. Non-tax revenues were bolstered by a significant rise in dividends from the State Bank of Pakistan, which increased nearly threefold, and higher collections from the Petroleum Levy, which rose by 20%.

Despite the positive revenue trends, total expenditures also increased by 18% year-on-year. Markup payments saw a modest rise of 9% to PkR8.9 trillion. However, the impact of higher debt levels was mitigated by declining interest rates, with the Government of Pakistan’s total debt rising by 12% to PkR76.0 trillion as of May 2025.

The fiscal performance for the fourth quarter also showed improvement, with the budget deficit amounting to 2.8% of GDP, marking a 3% year-on-year reduction. This improvement in fiscal metrics is seen as a critical step towards stabilizing the country’s economy and meeting international financial commitments.