Karachi: The fiscal deficit in Pakistan narrowed significantly by 24% year-on-year for the first nine months of fiscal year 2025, according to a report from the finance division. The consolidated fiscal accounts for the third quarter of FY25 showed a budget deficit of PKR 1.4 trillion, or 1.2% of GDP, down from PKR 1.5 trillion, or 1.4% of GDP, during the same period last year. For the nine months ending March 2025, the budget deficit amounted to PKR 3.0 trillion, representing 2.4% of GDP.

The report highlighted a 23% year-on-year increase in total revenues during the third quarter of FY25. This growth was driven by a 26% rise in tax revenues, with direct taxes up by 21% and sales tax increasing by 33%. Non-tax revenues also saw a 7% improvement, bolstered by a 15% increase in collections from the Petroleum Levy and a substantial rise in dividends from state-owned enterprises.

On the expenditure side, the total rose by 14% year-on-year during the quarter. However, markup payments remained steady at PKR 1.3 trillion, possibly due to declining interest rates which somewhat offset the impact of higher debt levels. The government's total debt stood at PKR 73.0 trillion as of February 2025, marking a 13% increase year-on-year.

The primary balance recorded a deficit of PKR 135 billion for the third quarter of FY25 but maintained a surplus of PKR 3.5 trillion, or 2.8% of GDP, during the first nine months of FY25. This is significantly higher than the International Monetary Fund's annual target of a primary surplus of PKR 1.2 trillion for the fiscal year.

The data underscore the country's fiscal trajectory and highlight the significant role of rising tax revenues in narrowing the fiscal deficit.