Fiscal discipline achieved – can growth be next?
The last fiscal year’s bottom-line numbers are promising. The consolidated deficit was reduced to 2.6 percent of GDP, the lowest since FY04. It is a long way from FY22 and FY23, when the deficit averaged 7.9 percent of GDP and the country was on the verge of default. The government has posted a primary fiscal surplus for the third consecutive year, clocking 2.9 percent of GDP in FY26, perhaps the…
The fiscal year 2026 has seen the Pakistani government achieve fiscal discipline, with the consolidated deficit reduced to 2.6 percent of GDP, the lowest since FY04. This significant improvement is due to the reduction in the government's debt servicing burden, which has dropped from 122 percent to 66 percent over the same period.
However, this fiscal consolidation has come at a cost, as high tax burdens, including the petroleum levy, and low development spending have stifled economic growth. In the upcoming fiscal year 2027, the government aims to lower the tax burden, but it remains high, which may discourage investment. Despite the government's efforts to keep primary fiscal surpluses, it has set revenue targets that are unachievable, leading to continued tax strangulation.
Non-tax revenues, particularly from petroleum levies, have increased, but real GDP growth remains marginal due to the high tax burden.
Brief written by urgent.news from Business Recorder's own syndicated text. Machine-written — may contain errors; check the original before relying on it.
