Pakistan’s budget recorded a deficit of Rs1.54 trillion, or 1.2% of GDP, in the first half of the fiscal year 2024-25, after a statistical discrepancy of Rs0.43 trillion turned an initial surplus into a shortfall. The deficit emerges just ahead of the International Monetary Fund’s (IMF) first review talks under the $7 billion Extended Fund Facility (EFF), scheduled for later this month.
In the first quarter (July-September), the budget had posted a surplus, largely due to a lump-sum booking of State Bank of Pakistan (SBP) profits. However, by the end of December, the fiscal position had shifted into a deficit, with total revenues and expenditures failing to fully reconcile.
The federal government’s statistical discrepancy was recorded at Rs0.23 trillion, while Punjab, Sindh, and Khyber Pakhtunkhwa (K-P) showed discrepancies of Rs0.198 trillion, Rs0.22 trillion, and Rs0.34 trillion, respectively. Balochistan recorded a negative discrepancy of Rs0.53 trillion.
According to the finance ministry’s fiscal operations report, debt servicing and defence spending accounted for the largest share of expenditures, while development spending, particularly under the federal Public Sector Development Programme (PSDP), remained low.
The federal PSDP utilization stood at Rs0.132 trillion in the first six months, down from Rs0.22 trillion in the first quarter, while provincial governments spent Rs0.639 trillion on development projects.
Debt servicing costs reached Rs5.14 trillion in the first half of the fiscal year. Following six consecutive policy rate cuts, the finance ministry has revised its debt servicing projection for FY25 downward from Rs9.7 trillion to Rs8.7 trillion.
Total revenues for the first six months stood at Rs9.76 trillion, with Rs6 trillion collected through tax revenues and Rs3.69 trillion from non-tax sources.
Meanwhile, total expenditures stood at Rs11.3 trillion, with debt servicing remaining the largest expense at Rs5.14 trillion, followed by defence spending at Rs0.89 trillion.
The budget deficit was financed through a mix of external and domestic borrowing, with net external borrowing at negative Rs0.78 trillion, while domestic borrowing stood at Rs1.61 trillion.
As Pakistan prepares for IMF review talks, the government faces pressure to manage its fiscal balance amid rising debt servicing costs and low development spending.
