ISLAMABAD (MNN); The International Monetary Fund has projected Pakistan’s fiscal deficit at around 3.2 per cent of GDP while advising the government to phase out costly fuel subsidies, expand the tax base, and address financial risks to ensure long-term stability.
In its Fiscal Monitor 2026, the IMF noted that Pakistan’s revenues appear to have peaked, with a stable but slightly declining outlook through 2031. While public debt is expected to gradually decrease, it will remain above the limits set under the Fiscal Responsibility and Debt Limitation Act. Government spending, the Fund warned, is likely to remain persistently high.
The IMF expects the fiscal deficit to fall from 5.4pc in FY2025 to 3.2pc in the current and next fiscal year, before declining further to 2.8pc by FY2029. However, it may rise again to 4.6pc by FY2031.
Pakistan’s primary surplus — excluding interest payments — is projected to peak at 2.5pc this year but gradually weaken to near zero by FY2031. Revenues are expected to remain around 15.5pc of GDP in the medium term, while expenditures may initially decline due to reduced debt servicing costs before rising again toward the end of the decade.
The IMF also forecast a steady decline in Pakistan’s debt levels, with gross government debt falling from 70.1pc of GDP this year to about 58.2pc by FY2031. Net debt is also expected to decrease over the same period.
On the global front, the IMF warned of heightened financial risks due to ongoing conflict in the Middle East, inflationary pressures, and tightening financial conditions. It cautioned that prolonged instability could further strain global markets through rising energy prices, higher interest rates, and stronger dollar pressures.
The Fund emphasised that governments, including Pakistan, should avoid broad-based fuel subsidies and instead adopt targeted support measures for vulnerable groups. It also stressed the importance of maintaining central bank independence, fiscal discipline, and transparent policymaking to sustain economic stability.
