Consolidated fiscal operations
The outlay of most concern to the general public is the sustained rise in current expenditure as a percentage of Gross Domestic Product on three counts: (i) it comprised 95 percent of total outlay in 2024-25 compared to 84 percent in 2022-23 as per the summary of the consolidated fiscal operations of that year; (ii) current expenditure was budgeted at around 17 trillion rupees in 2024-25 while the government spent 15.69 trillion rupees with 1.6 trillion rupees savings attributed to the decline in the discount rate — from 22 percent in June last year to 11 percent in the current year; however (iii) mark-up payments as a major component of current expenditure were 8,159,826 million rupees in 2023-24 against 8,887,417 million rupees in 2024-25 indicative of an increased reliance on borrowing by the government — up to 7,089 billion rupees last fiscal year as reported in the summary.
Federal tax revenue rose to 11,744 billion rupees in 2024-25 against 9,311 billion rupees in 2023-24 — with the major increase attributed to increase in direct taxes (disturbingly consisting of withholding taxes levied in the sales tax mode) — an indirect tax — though wrongly credited under direct taxes in spite of the Auditor General's exhortation to the FBR to abandon this practice. The incidence of indirect taxes on the poor is greater than on the rich.
Non-tax revenue increased from 3,050.4 billion rupees in 2023-24 to 4,905.9 billion rupees in 2024-25 due to higher petroleum levy collections (again an indirect tax) and more than doubling of State Bank of Pakistan profits which mopped up USD 8 billion from the open market last fiscal year to shore up dollar reserves that at USD 14.3 billion (25 July) are still lower than the USD 16 billion rollovers from friendly countries, leading to an erosion in the external value of the rupee. SBP has since agreed to ease purchases in the open market.
Development expenditure rose from 635,148 million rupees in 2023-24 to 785,836 million rupees in 2024-25 — a rise that indicates authorisations as noted by the Planning Ministry however not disbursed due to fiscal constraints. The Finance Committee of parliament was informed that 596 billion rupees had been disbursed by end-May 2025, and it is rather difficult to accept that the government disbursed a whopping 189.8 billion rupees in June this year, the last month of the fiscal year.
GDP (nominal) was estimated at 106,045 billion rupees in 2023-24 and 114,692 billion rupees in 2024-25, which implies an 8 percent rise, though actual GDP growth for last fiscal year was 2.6 percent. This may have led to an erosion in the rupee value which remained remarkably constant with the IMF documents exhorting the government to 'monitor the recent Real Effective Exchange Rate appreciation to avoid eroding competitiveness,' and/or a reduction in Consumer Price Index though that declined to 11.09 percent in 2024-25 against 28.31 percent in 2023-24.
Bank borrowing by the provinces rose to negative 920,434 billion rupees against negative 212,157 billion rupees that no doubt contributed to claims of a surplus while non-bank also rose from negative 1022 billion rupees to 29,430 billion rupees.
Sales tax on services (constitutionally a provincial tax) rose from 504,617 million rupees in 2023-24 to 612,418 million rupees in 2024-25 with Sindh continuing to take the lead at 284,427 million rupees (raising collections by 24.8 percent in comparison to 2023-24), Punjab collecting 264,026 million rupees (raising collections under this head by 17.6 percent compared to 2023-24), KPK at 40,772 million rupees (13.5 percent rise from the previous year) and Balochistan at 23,193 million rupees (7.7 percent increase).
To conclude, the economic team managed to contain the primary balance to 6,168 billion rupees in 2024-25 against 9,529 billion rupees the year before while the budget deficit declined from 7,207 billion rupees in 2023-24 to 6,168 billion rupees in 2024-25; however, this was largely due to heavier borrowing in 2024-25.
Copyright Business Recorder, 2025
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