Pakistan’s fiscal sector has demonstrated significant stability during the first quarter of FY2025, thanks to prudent fiscal consolidation measures. From July to September 2024, the country’s net federal revenues surged by an extraordinary 186% to reach PKR 4,019 billion, compared to PKR 1,406 billion during the same period last year. This remarkable growth was primarily driven by the unprecedented surplus profit of PKR 2,500 billion from the State Bank of Pakistan (SBP).
Tax revenues increased by 25.5% to PKR 2,563 billion, while non-tax revenues experienced an astonishing rise of 566.9%, climbing to PKR 3,022 billion. In comparison, total government expenditures grew modestly by 1.8%, amounting to PKR 2,483 billion as opposed to PKR 2,438 billion in the previous year. Notably, markup expenditures decreased by 5.3%, reflecting the gradual decline in the SBP’s policy rate.
As a result of these fiscal developments, the fiscal balance posted a surplus of PKR 1,896 billion (equivalent to 1.5% of GDP), a stark contrast to the PKR 981 billion deficit (0.9% of GDP) reported in the same period last year. Similarly, the primary balance also improved significantly, recording a surplus of PKR 3,202 billion (2.6% of GDP), up from PKR 400 billion (0.4% of GDP) during the corresponding period last year.
The Federal Board of Revenue (FBR) also contributed significantly to fiscal stability. During the July-October 2024 period, FBR’s net tax collections rose by 25.3%, totaling PKR 3,442.6 billion compared to PKR 2,748.4 billion in the previous year. In October 2024 alone, FBR collected PKR 879.7 billion, marking a 24.5% increase from the PKR 706.8 billion collected in October 2023.
Analysts attribute these positive outcomes to effective fiscal policies, improved tax collection mechanisms, and the government’s focus on prudent spending. The surplus profits from the SBP were particularly instrumental in offsetting the fiscal deficit, allowing the government to strengthen its financial position.
These developments have positioned Pakistan’s fiscal sector for greater stability, reducing reliance on external borrowing and enhancing the government’s ability to finance development projects. The reduction in markup expenditures also provides additional fiscal space to address critical socio-economic challenges.
Looking forward, sustaining fiscal discipline and expanding the tax base will be crucial for maintaining this momentum. Key reforms, including measures to enhance efficiency in public expenditures and boost revenue generation, will play a vital role in ensuring long-term fiscal sustainability.
Pakistan’s fiscal achievements in FY2025 not only reflect robust economic management but also lay the groundwork for enhanced financial stability and economic resilience. With consistent efforts, the country is on track to reinforce its fiscal position, enabling greater investment in development and growth.