Pakistan is expected to record its lowest fiscal deficit in 21 years during fiscal year 2025-26, with the budget gap projected at 3.6 percent of gross domestic product (GDP), according to estimates shared by Topline Securities.
The projected deficit is close to the 3.2 percent of GDP target set by the International Monetary Fund. This could turn out to be a big improvement in the country’s fiscal position.
The sharp decline in the fiscal deficit is due to the government’s restrictive fiscal policies implemented under the IMF-supported economic reform program.
The measures focused on containing expenditure growth while improving revenue collection.
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Also, the improvement was supported by healthy growth in both tax and non-tax revenues, alongside tighter control over government spending.
Topline said fiscal consolidation has remained a key requirement under the IMF bailout program to help restore macroeconomic stability and reduce borrowing needs.
A fiscal deficit occurs when government expenditures exceed total revenues. A lower deficit generally reduces pressure on public debt and can strengthen investor confidence in the economy.
If realized, the FY26 fiscal deficit would mark Pakistan’s strongest fiscal performance in more than two decades and point towards big progress in meeting IMF-backed targets.
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