The International Monetary Fund (IMF) has increased Pakistan’s primary budget surplus target to 1.6 percent of GDP for the fiscal year 2025-26, up from 1 percent this year, signaling a strategic shift from tax hikes toward stricter expenditure control.
According to the IMF’s fiscal framework, total government revenue is projected to rise by 0.7 percent of GDP, while overall expenditures are expected to decline by 1.3 percent of GDP. Combined revenues for federal and provincial governments are estimated at 15.2 percent of GDP, equivalent to Rs. 19.6 trillion.
Total government spending across all tiers is forecasted at 20.3 percent of GDP, or approximately Rs. 26.3 trillion. Defense spending is set to remain steady at 2 percent of GDP, with an anticipated increase of at least 18 percent compared to last year’s allocation.
The government plans to allocate Rs. 921 billion (0.7 percent of GDP) for development projects and Rs. 1.35 trillion (just over 1 percent of GDP) for subsidies, including Rs. 1.04 trillion (0.8 percent of GDP) earmarked for the power sector.
The overall budget deficit is projected to narrow to 5.1 percent of GDP, or Rs. 6.6 trillion, down from 5.9 percent this year, though the nominal deficit remains nearly unchanged.
Foreign direct investment (FDI) is expected to hold steady at 0.6 percent of GDP in the coming fiscal year. The IMF also anticipates additional revenue gains through enforcement of agricultural income tax and improved compliance in under-taxed sectors.
