Islamabad, May 8, 2025: Pakistan fiscal deficit has significantly reduced to 2.4% of GDP in the first nine months of fiscal year 2025 (9MFY25), compared to 3.7% during the same period in FY24.
This positive shift comes as a result of notable gains in both tax and non-tax revenues, according to official statistics released on May 7, 2025.
In the third quarter of FY25 (3QFY25), the fiscal deficit stood at 1.2% of GDP, equivalent to Rs 1.4 trillion, marking a decrease from 2.8% in the prior quarter and 1.4% in 3QFY24.
This improvement is primarily attributed to a 26% increase in tax revenue and an impressive 68% rise in non-tax revenue during the first nine months of FY25.
Despite a marginal 0.1% of GDP primary deficit in 3QFY25, the primary surplus for the nine months was a robust 2.8%, outpacing the 1.5% surplus recorded during the same period last year.
This remarkable growth is largely driven by the State Bank of Pakistan’s record profit of Rs 2.5 trillion (2% of GDP), a significant increase from the Rs 0.97 trillion (0.9% of GDP) achieved in FY24, as reported by Topline Securities.
Tax collections amounted to Rs 3.0 trillion in 3QFY25, bolstered by a 26% surge in Federal Board of Revenue (FBR) receipts.
However, tax revenues still fell short of International Monetary Fund (IMF) targets, largely due to lower-than-expected autonomous growth amid subdued inflation.
Interest expenses were steady at Rs 1.3 trillion in 3QFY25, unchanged from the previous year but reflecting a 66% decrease from the previous quarter due to higher interest payments in Q2 and Q4.
Although average yields on six-month Treasury bills dropped by 933 basis points year-on-year, this benefit was partly offset by a 17% rise in domestic government borrowing since March 2024.
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The combined ratio of FBR tax and Petroleum Development Levy (PDL) to GDP rose to 2.5% in 3QFY25, up from 2.3% in 3QFY24.
Public Sector Development Program (PSDP) expenditures increased to 0.6% of GDP, compared to 0.5% in 3QFY24.
Pension expenditures grew by 8% to Rs 223 billion, and defense spending increased by 11% to Rs 534 billion. Transfers to provinces remained stable at 56.8% of total tax revenues.
Although the improvements are promising, Topline Securities maintains its full-year budget deficit forecast for FY25 at 5.5% of GDP, with a primary surplus target of 2.0%, based on a revised GDP estimate of Rs 115 trillion.
