Pakistan’s fiscal sector demonstrated notable resilience in the early months of FY2025, with federal revenue collections showing strong growth and expenditure controls yielding positive results. Between July and August 2024, net federal revenues rose by 20.8%, amounting to PKR 986.7 billion, up from PKR 816.6 billion during the same period last year. Both tax and non-tax revenues contributed to this increase, with tax revenues climbing by 20.8% and non-tax revenues by 20.6%. A key driver of non-tax revenue growth was the petroleum levy, which jumped by 19.6% to PKR 168.3 billion, a rise from PKR 140.7 billion in the previous fiscal year.
In parallel, total expenditures for the government reached PKR 1,635.5 billion for July-August FY2025, marking a modest 3.1% increase from the previous year’s PKR 1,585.7 billion. Despite this growth in spending, the federal government managed to reduce its debt servicing costs, with markup expenditures decreasing by 6.3% due to a gradual decline in the policy rate. This reduction in debt-related costs helped support fiscal consolidation efforts and contributed to an improved fiscal deficit position. The fiscal deficit narrowed to 0.7% of GDP compared to 0.8% in the same period last year, signaling the effectiveness of ongoing fiscal consolidation policies.
Further reinforcing this trend, the primary balance posted a surplus of 0.05% of GDP, reflecting disciplined fiscal management. As the government prioritizes budgetary health and efficient spending, this surplus underscores its commitment to consolidating finances while maintaining essential expenditures. Fiscal experts highlight the importance of this surplus as a buffer against future economic uncertainties, giving policymakers added flexibility to address evolving financial challenges.
The Federal Board of Revenue (FBR) has also shown substantial progress in tax collections for FY2025. In the first quarter (July-September), the FBR’s net tax collections surged by 25.5%, amounting to PKR 2,562.9 billion, a significant increase from PKR 2,041.5 billion in the same period last year. September alone saw a remarkable 32.7% year-on-year increase in tax collections, with revenues rising from PKR 834 billion in September 2023 to PKR 1,107 billion this year. This uptick in tax collections points to an effective strategy by the FBR to enhance compliance and broaden the tax base.
The robust fiscal performance seen so far in FY2025 reflects the impact of several economic reforms and revenue-boosting policies implemented by the government. Tax policy changes, along with improvements in compliance enforcement, have allowed the FBR to achieve significant gains in revenue, aligning with broader fiscal goals. Enhanced digitalization and a focus on tracking high-value transactions have further aided revenue collection efforts, with the government working to enhance transparency and reduce tax evasion.
The government’s emphasis on managing non-essential spending has also contributed to the progress in fiscal health. Targeted cuts and efficiency drives in various sectors have ensured that essential programs and services remain funded while reducing waste in non-priority areas. Analysts view this disciplined approach as crucial for maintaining momentum in fiscal consolidation, especially in the face of potential global economic pressures and fluctuating commodity prices.
Looking ahead, the resilience shown by Pakistan’s fiscal sector suggests a strong foundation for sustained economic stability. Policymakers aim to continue this trajectory, with a focus on strengthening revenue generation, ensuring judicious spending, and managing debt levels prudently. The government’s fiscal policies, coupled with active monitoring of expenditure and revenue targets, are expected to support long-term economic stability, paving the way for more robust economic growth and fiscal sustainability.
In sum, the first quarter of FY2025 offers encouraging signs of Pakistan’s fiscal health, marked by increased revenue, improved tax compliance, and responsible spending measures. As the government continues its fiscal consolidation journey, these developments lay the groundwork for economic resilience, providing a platform for continued progress toward sustainable financial health.
Source: GoP Finance Division