The federal and provincial budgets for 2025-26 are likely to be announced in early June. Already, the first review report by the IMF Staff, which was released on the 17th of May, contains detailed estimates of both; the likely fiscal outcome in 2024-25 and budget estimates for 2025-26.

The objective of this article is to identify, first; the deviations in the projected outcome in 2024-25 from the original budget estimates and second, to examine the magnitude of the key fiscal indicators for 2025-26.

The budgetary outcome, according to the IMF Staff Report, is likely to be significantly better than originally envisaged. The budget deficit is estimated at Rs 6,486 billion, as compared to the initially targeted level of Rs 7,344 billion. This is perhaps the first time in many years we are likely to see this type of positive outcome. The budget deficit in 2024-25 is estimated at 5.6 percent of the GDP, as compared to the initial budget estimates of 6 percent of the GDP.

How has this favorable outcome been achieved? It is primarily due to a significant containment of expenditure by Rs 1132 billion and a quantum jump in non-tax revenues of Rs 1614 billion. The steep reduction in interest rates in 2024-25 is likely to lead to a saving in the cost of debt servicing by as much as Rs 914 billion.

The position on the revenue side is a projected shortfall in 2024-25 of only Rs 274 billion, despite a shortfall in FBR revenues of Rs 581 billion. Other sources of revenues are expected to yield Rs 307 billion higher revenues than originally targeted.

The efforts by the government in restricting the size of the budget deficit to below the initially projected levels must be recognized, as has been done by the IMF. A large primary surplus of over 2 percent of the GDP is likely to be generated in 2024-25.

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