Pakistan is on track to record its lowest fiscal deficit in more than two decades, with the budget shortfall estimated at 3.6% of GDP in fiscal year 2025-26, according to analyst projections.
The forecast is broadly in line with expectations from the International Monetary Fund, which has projected a fiscal deficit of 3.2% of GDP for the current fiscal year.
The sharp improvement in public finances has been driven by the government’s fiscal tightening measures under the IMF-supported reform programme. Authorities have kept a firm check on expenditure growth while benefiting from stronger revenue collection.
Higher tax receipts, along with increased non-tax revenues, have helped narrow the budget gap despite ongoing economic challenges. At the same time, spending controls have limited pressure on the federal budget, contributing to a stronger fiscal position.
The expected decline in the fiscal deficit highlights the impact of fiscal consolidation efforts aimed at restoring macroeconomic stability, reducing borrowing requirements and improving confidence in the economy.
If achieved, the FY26 deficit level would mark Pakistan’s strongest fiscal performance in 21 years and represent a major milestone in the government’s IMF-backed reform agenda.
