The International Monetary Fund (IMF) has predicted that Pakistan’s government expenditure will rise by 2.1 percentage points, from 19.3% of the GDP in 2024 to 21.4% in 2025.
This increase aligns with the Fund’s broader expectations for the country’s fiscal landscape as detailed in their report, “Fiscal Monitor, Putting a Lid on Public Debt.”
According to the report, Pakistan’s gross government debt is expected to climb from 69.2% of GDP in 2024 to 71.4% in 2025. Similarly, net government debt is also forecast to rise from 63.5% in 2024 to 65.6% in 2025.
Government revenues are also projected to increase significantly, reaching 15.4% of GDP in 2025, up from 12.6% in 2024, and maintaining at 15% in 2026. This increase in revenue is anticipated despite lower rates in previous years—11.5% in 2023.
For 2025, the IMF expects the government’s primary balance—a measure of fiscal health excluding interest payments—to reach 2.1%, a marked improvement from 0.9% in 2024.
This positive shift is largely attributed to a one-time surge in non-tax revenue from high central bank dividends due to elevated policy rates in 2024. However, this balance is expected to shift into a deficit of 0.2% of GDP by 2026, reflecting a normalization of fiscal conditions.
The overall government fiscal balance is projected to improve slightly, with a deficit of 6% of GDP in 2025, compared to 6.7% in 2024.
Moreover, Pakistan’s debt service needs, as represented by the gross financing need, is expected to account for about 22% of GDP in 2024, encompassing the total deficit and maturing government debt for the year.
Additionally, the IMF’s outlook considers the difference between interest rates and growth over the period from 2024 to 2029 to be -3.6%, and notes that as of 2022, non-resident holdings of general government debt stood at 31.7% of the total. These elements underline the complexities and challenges in Pakistan’s fiscal management strategy moving forward.
