Decrease in the budget deficit from 6.8% to 5.4% of the nation's GDP between FY24 and FY25
Pakistan's Fiscal Year 2024-25 (FY25) saw a significant shift in the country's financial landscape, with key indicators offering insights into the government's spending patterns and revenue generation.
The country's total revenues stood at Rs17.997 trillion, comprising Rs12.722 trillion in direct and indirect tax collections and Rs5.27 trillion in non-tax revenues. The Federal Board of Revenue (FBR) collected Rs11.744 trillion in FY25, a notable achievement. However, the total budget deficit for the year was Rs6.16 trillion, or 5.4% of the GDP, marking a decrease from the 6.8% deficit in FY24.
One of the major factors contributing to the budget deficit was the expenditure on debt servicing, which consumed a substantial portion of the budget. The domestic debt servicing bill for FY25 was Rs7.8 trillion, and external debt servicing was Rs0.89 trillion, totalling Rs8.887 trillion. This left limited fiscal space for other expenses.
The second major expenditure head was the defense requirement, which consumed Rs2.193 trillion. Interestingly, the government had to borrow almost 50% of the amount for defense spending, which may have strained financial accounts and added complexity to fiscal data reconciliation.
Transfers to provinces were another significant aspect of the FY25 budget, with Rs6.85 trillion allocated. Net revenue receipts for the federal government stood at Rs9.94 trillion, indicating substantial intergovernmental fund flows. However, these transfers and the corresponding revenue receipts may contribute to statistical discrepancies due to timing or classification differences in accounting.
The statistical discrepancy increased to Rs0.32 trillion in FY25, up from Rs0.17 trillion in FY24. The main factor contributing to this increase was the mismatch between data collected from different sources through income and expenditure approaches, which did not fully align.
The Public Sector Development Programme (PSDP) related expenditures stood at Rs1.048 trillion and were funded through borrowed money. Total booked expenditures for FY25 stood at Rs24.16 trillion, with current expenditure accounting for Rs21.52 trillion.
In conclusion, the increase in the statistical discrepancy and the high expenditure on debt servicing and defense requirements reflect challenges in reconciling differing data sets on income and expenditure during a fiscal year marked by large defense borrowing, high debt servicing costs, and substantial intergovernmental transfers. These factors complicate expenditure tracking and fiscal data reconciliation, making it crucial for the government to address these issues for a more transparent and efficient budgeting process.
[1] Source: State Bank of Pakistan (SBP) - Annual Report 2024-25 [2] Source: Ministry of Finance - Budget Documents 2024-25 [3] Source: Dawn News - "Pakistan's FY25 budget deficit decreases to 5.4% of GDP" [4] Source: The Express Tribune - "Pakistan's statistical discrepancy increases to Rs0.32 trillion in FY25" [5] Source: Business Recorder - "Intergovernmental transfers and their impact on Pakistan's budget deficit"
The finance news for Pakistan's FY25 highlights the significant challenge in reconciling differing data sets on income and expenditure, which has implications for fiscal data reconciliation and transparency. The budget deficit for the year was Rs6.16 trillion, with defense requirements and debt servicing consuming substantial portions of the budget. (Source: State Bank of Pakistan Annual Report 2024-25, Ministry of Finance Budget Documents 2024-25)
The business sector also emphasizes the increase in the statistical discrepancy to Rs0.32 trillion, up from Rs0.17 trillion in FY24, and the nearly 50% borrowing for defense spending, which adds complexity to fiscal data reconciliation. (Source: Dawn News, The Express Tribune)
