Pakistan’s central bank has warned that the government may struggle to meet its fiscal target of a 1 per cent primary surplus in FY2024-25, a key commitment under the country’s $7 billion IMF loan program. The State Bank of Pakistan (SBP), in its latest monetary policy statement, said the target looks difficult to achieve without broadening the tax base and reforming loss-making state-owned enterprises.
Failure to meet the surplus goal would jeopardise Pakistan’s 37-month Extended Fund Facility with the IMF, which is contingent on fiscal discipline and structural reforms. While the Finance Ministry recently reported a primary surplus of Rs3.45 trillion (3 per cent of GDP) for July–March FY25—up from 1.7 per cent in the same period a year earlier—the SBP cautioned that sustaining this surplus will be difficult without deeper reform.
The central bank noted that tax revenue grew 26.3 per cent year-on-year during July–April, but remained below target. It also highlighted that the government raised petroleum development levy rates, which could help non-tax revenues in the final quarter. On the expenditure side, fiscal discipline remained relatively intact during the first nine months of the year.
Despite fiscal concerns, the SBP maintained a positive economic outlook. It kept its GDP growth forecast at 2.5 to 3.5 per cent for FY25 and expects further acceleration in FY26, even as the IMF has downgraded global growth projections due to rising trade uncertainty. Pakistan’s GDP grew 1.5 per cent in the first half of FY25, with growth in the second quarter reaching 1.7 per cent.
The SBP said high-frequency indicators—such as rising vehicle and fuel sales, increased electricity generation, and improving sentiment—suggest economic activity is gaining momentum. Last week, the central bank cut its policy rate by 100 basis points to 21 per cent, its first cut in nearly four years, as inflationary pressures begin to ease.
