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Karachi, August 5, 2025: Pakistan has recorded a 9-year low fiscal deficit of 5.38% of GDP in FY25, outperforming both the government’s revised estimate and the IMF’s projection of 5.6%. The improvement is primarily driven by a strong 36% year-on-year (YoY) growth in combined tax and non-tax revenues, against an 18% YoY rise in total expenditures.
According to a report issued by Topline Securities, total revenues saw a substantial boost due to a 66% surge in non-tax revenues, led by a historic Rs2.62 trillion dividend from the State Bank of Pakistan (SBP). This is a significant rise compared to Rs0.97 trillion in FY24 and reflects the impact of elevated interest rates and an expanded SBP balance sheet.
Tax revenues also grew by 26% YoY, backed by equivalent growth in FBR collections, which now stand at Rs12.9 trillion, up from Rs4.3 trillion in FY20. Over the past five years, FBR revenues have grown 3.02 times, outpacing the GDP’s 2.75x increase from Rs41 trillion in FY20 to Rs114.6 trillion in FY25.
Tax-to-GDP Ratio Hits 7-Year High
Pakistan’s FBR tax-to-GDP ratio (including Petroleum Development Levy) rose to 11.3% in FY25, the highest in seven years. This compares with 9.7% in FY24 and an average of 9.9% over the past five years. Analysts attribute the shift partly to the government’s strategy of raising PDL in place of sales tax, possibly to avoid provincial revenue sharing.
Primary Balance at 20-Year High
A key highlight is the primary surplus of 2.4% of GDP, the highest in over two decades. The surplus outperformed the government’s revised forecast of 2.2% and the IMF’s 2.1% projection, thanks to the strong revenue performance outpacing expenditure growth.
Debt Servicing Pressures Ease
Debt servicing has shown improvement. Interest expenses declined to 76% of FBR tax revenues, down from 88% in FY24. The moderation is a result of just 9% growth in interest payments, reflecting lower average interest rates during the fiscal year.
Development Spending Rises
Pakistan’s Public Sector Development Programme (PSDP) spending increased to 2.6% of GDP, a five-year high, compared to 1.9% in FY24. However, it remains below the historic peak of 5% of GDP recorded in FY17.
Outlook for FY26: Stronger Fiscal Discipline
Pakistan is projected to record its third consecutive year of primary surplus in FY26, a feat not achieved in over 20 years. The overall fiscal deficit is expected to narrow further to 4.0–4.1% of GDP, which would represent the lowest fiscal deficit in two decades.
