Pakistan has reported a budget deficit of Rs1.5 trillion (1.2% of GDP) for the first half of the 2024-25 fiscal year, reflecting a continued imbalance between its revenue generation and public expenditures. The country’s total revenue stood at Rs9.8 trillion (7.9% of GDP) while its expenditures reached Rs11.3 trillion (9.1% of GDP) in the period from July to December 2024. This fiscal shortfall of Rs1.5 trillion has raised concerns about Pakistan’s economic sustainability and the government’s fiscal discipline. According to the consolidated federal and provincial fiscal operations report released by the Finance Ministry, the government’s primary balance showed a surplus of Rs3.6 trillion (2.9% of GDP), a positive sign that is counterbalanced by the overall deficit.
Looking ahead, the government has projected a budget deficit of Rs7.3 trillion (5.9% of GDP) for the full fiscal year 2024-25. However, there are expectations for a primary surplus, forecasted at 2% of GDP, or Rs2.5 trillion, which suggests a strategic focus on improving fiscal health in the medium term.
In the first half of FY2024-25, the total revenue of Rs9.8 trillion was driven by tax collections and non-tax revenues. The Federal Board of Revenue (FBR) contributed Rs5.6 trillion through taxes, while non-tax revenues amounted to Rs3.7 trillion. The non-tax revenues included various sources such as markup from public sector enterprises (PSEs) and others (Rs83.1 billion), dividends (Rs97.5 billion), profit from the Pakistan Telecommunication Authority (PTA) and others (Rs28.8 billion), and the surplus profit from the State Bank of Pakistan (Rs2.5 trillion). Other sources included defence receipts, passport fees, and royalties from oil and gas, among others.
On the expenditure side, total spending during the first half of the fiscal year reached Rs11.3 trillion, with a significant portion allocated to interest payments. The government’s interest payments totaled Rs5.1 trillion, which included Rs4.7 trillion in domestic interest and Rs466 billion in foreign interest payments. Additionally, key expenditures included Rs449.6 billion for pensions, Rs338 billion for the operation of the civil government, Rs237 billion in subsidies, and Rs585 billion in grants to other entities. Development expenditure, including the Public Sector Development Programme (PSDP), was Rs772 billion.
Interestingly, Pakistan’s provincial governments reported a budget surplus of Rs775.5 billion during the first half of the fiscal year. This surplus came as a result of the provinces’ total revenues of Rs4.1 trillion, outpacing their expenditures of Rs3.4 trillion. This achievement reflects better fiscal management at the provincial level, in contrast to the federal deficit.
The widening budget deficit signals persistent challenges for Pakistan’s fiscal policy, particularly in light of rising public debt and inflation. While the primary surplus indicates some financial discipline, the government’s reliance on foreign and domestic borrowing to meet its fiscal obligations raises questions about long-term economic stability. Looking forward, the government will need to implement more effective revenue-raising strategies while controlling public spending to reduce the fiscal deficit. Economic analysts are particularly focused on the government’s ability to maintain its commitments to structural reforms and fiscal discipline as part of broader efforts to stabilize the economy and support sustainable growth.
The ongoing fiscal imbalance highlights the urgent need for Pakistan to address its macroeconomic challenges and consider reforms in taxation and public sector spending to avoid further budget deficits in the future. As the fiscal year progresses, the government will likely continue its efforts to manage the economy through a combination of targeted revenue generation, expenditure control, and external financial support.