IMF Projects Gradual Decline in Pakistan’s Debt and Fiscal Deficit Over Next Five Years

ISLAMABAD (Mudassar Iqbal):  The International Monetary Fund (IMF) has forecast a steady improvement in Pakistan’s fiscal indicators over the next five years, including a gradual decline in the country’s debt-to-GDP ratio and fiscal deficit.

According to the IMF’s Fiscal Monitor Report 2025, Pakistan’s debt-to-GDP ratio is projected to drop from 71.6% in the current fiscal year to 71.3%, with a further decline anticipated to 60.2% by the end of the five-year period.

The fiscal deficit is expected to reach 4.1% of GDP this year, slightly exceeding the government’s official target of 3.9%. However, the IMF projects that this deficit will be reduced gradually to 2.8% over the medium term.

The primary balance — which excludes interest payments — is forecast to reach 2.5% this year, surpassing the government’s 2.4% target. For the next fiscal year, the IMF expects the primary balance to moderate to 2%.

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Government expenditure is estimated at 20.4% of GDP for the current year, with a projected decrease to 19.6% in the next fiscal cycle. Meanwhile, Pakistan’s revenue-to-GDP ratio is expected to rise to 16.2% this year, up from 15.7% in the previous year — indicating improvements in revenue generation efforts.

The IMF’s outlook reflects cautious optimism about Pakistan’s fiscal path, contingent on continued reforms, improved revenue mobilization, and expenditure discipline.