ISLAMABAD : Pakistan recorded a 9-year low fiscal deficit of 5.38% in FY25, thanks to 36% YoY growth in both tax and non-tax revenues combined vs. 18% growth in total expenditures. The deficit of 5.38% is better than government’s revised forecast of 5.6% of GDP (earlier budgeted 5.9%) for FY25. Similarly, IMF also projected deficit at 5.6% of GDP.
According to Topline Securities, overall revenues have grown 36% YoY amidst 66% increase in non-tax revenues led by robust dividend of Rs2.62trn (vs. Rs0.97trn in FY24) from SBP amidst higher interest rates and expanded balance sheet.
While tax revenues have grown 26% YoY led by 26% growth in FBR revenues. In last 5 years FBR revenues (including PDL) have increased 3.02x from Rs4.3trn in FY20 to Rs12.9trn in FY25. While size of GDP during same period has increased 2.75x from Rs41trn to Rs114.6trn.
Tax to GDP ratio at 7 year high: FBR tax (with PDL) to GDP ratio has increased to 11.3% in FY25, a 7 year high compared to 9.7% in FY24 and average of 9.9% in last five years (FY20 to FY24). We have included PDL in tax ratio as government has significantly raised PDL to substitute it with sales tax may be to avoid sharing with provinces.
Primary Balance at 2.4% of GDP: Pakistan has recorded primary balance of 2.4% of GDP, highest surplus % in recent past (over 2 decades). Higher primary surplus is achieved as revenue growth surpassed the expenditures growth. This surplus of 2.4% of GDP is better than government’s revised projection of 2.2% of GDP and IMF forecast of 2.1%.
Interest expenses as % of FBR taxes down to 76%: Interest expenses as % of FBR taxes has declined to 76% compared to 88% in FY24. The improvement in debt servicing is on the back of controlled growth 9% in interest expenses on the back of lower interest rates.
PSDP spending as % of GDP at 5 year high: PSDP as % of GDP has increased to 2.6% of GDP compared to 1.9% in FY24, while still lower than historic high of 5% of GDP achieved in FY17.
Talking about Outlook, Topline Securities said Pakistan is expected to post 3rd consecutive year of primary surplus in FY26 after 2 decades. While overall fiscal deficit is expected to clock in at 4.0-4.1% of GDP in FY26, lowest in 2 decades. ENDS
