Pakistan has marked a significant fiscal milestone, recording a budget deficit of just 5.38% of GDP for FY2025 — the lowest in nine years. According to Topline Securities, this figure surpasses both the government’s revised target of 5.6% and the IMF’s forecast, reflecting an encouraging trend in fiscal management.

Revenue Surge Outpaces Spending:

• Total revenues saw a robust 36% year-on-year (YoY) increase.
• Non-tax revenues jumped 66%, buoyed by a record Rs. 2.62 trillion dividend from the State Bank of Pakistan (SBP), driven by high interest rates and balance sheet expansion.
• Tax revenues grew 26%, largely due to a strong 26% rise in FBR collections.

Tax-to-GDP Ratio at 7-Year High:

• FBR tax revenues (including Petroleum Development Levy) hit 11.3% of GDP — a seven-year high — compared to 9.7% in FY24.
• In the past five years, FBR collections tripled, climbing from Rs. 4.3 trillion in FY20 to Rs. 12.9 trillion in FY25.

Primary Surplus at Historic Levels:

• Pakistan achieved a primary surplus of 2.4% of GDP — its highest in over two decades — outperforming both government and IMF projections.
• The surplus reflects disciplined spending and robust revenue growth.

Debt Servicing Costs Ease:

• Interest payments as a share of FBR taxes fell to 76%, down from 88% last year, due to slower growth in interest expenses amid lowered rates.

Public Sector Investment Rebounds:

• Public Sector Development Program (PSDP) spending rose to 2.6% of GDP — a five-year high — though still below the peak 5% recorded in FY17.

Looking Ahead:

• Pakistan is poised to achieve a third consecutive year of primary surplus in FY26.
• The overall budget deficit is projected to drop further to around 4.0–4.1% of GDP — potentially the lowest in two decades.