Pakistan’s tax-to-GDP ratio reached 15.7% in fiscal year 2025, the highest in over two decades, marking a 3.2 percentage point increase from the previous year, according to the Ministry of Finance. This boost came as a result of increased taxes imposed under the IMF loan programme, along with significant non-tax revenue earnings, according to a news report.
In FY2024-25, non-tax revenues surged by 68%, outpacing the 26% growth in tax revenues. This indicated the government’s emphasis on improving overall revenue generation rather than implementing major tax reforms.
The increase in the tax-to-GDP ratio is the largest one-year rise since FY2020, when a similar increase occurred under IMF oversight. However, the growth recorded last fiscal year was the highest since 2004, when the ratio reached 18%.
Non-tax revenue for FY25 amounted to Rs5.27 trillion, representing 4.6% of GDP, marking the highest level in 16 years. This growth was primarily due to the higher collection of profits from the State Bank of Pakistan (SBP) and the Petroleum Development Levy (PDL).
The fiscal operations report also highlighted windfalls in revenue, including an increase in petroleum levy collections from Rs1.16 trillion to Rs1.22 trillion, and markup collection from public sector entities, which saw an unexpected rise of Rs108 billion, reaching Rs258 billion. These windfalls contributed to reducing Pakistan’s fiscal deficit to a 9-year low of 5.4%, down from 6.8% in FY24.
Despite this positive performance, the Federal Board of Revenue (FBR) fell short of its revised revenue collection target, with a shortfall of Rs1.23 trillion. This resulted in the country’s highest-ever tax shortfall.
Total federal expenditures for FY25 reached Rs24.16 trillion, with debt servicing accounting for Rs8.89 trillion, including Rs7.98 trillion for domestic debt servicing. Development and net lending expenditures amounted to Rs2.97 trillion, including Rs786 billion for the federal Public Sector Development Programme (PSDP) and Rs2.12 trillion for provincial development.
Statistical discrepancies for FY25 stood at negative Rs329 billion, reflecting differences in the reported figures between federal and provincial governments.
