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Pakistan’s budgeted interest payments have declined by Rs1.72 trillion, or 17.6 per cent, between FY25 and FY27. More significantly, the share of interest payments in total federal expenditure has fallen from 51.8pc to 42.9pc — a decline of 8.9 percentage points. At first glance, these figures appear to signal a significant improvement in Pakistan’s fiscal position. But does this decline represent genuine fiscal recovery, or is it merely temporary relief achieved by cutting development expenditure and improving the headline fiscal numbers?
This analysis compares Pakistan’s fiscal position in FY25, the first full fiscal year following the 2024 general election, with the current fiscal year FY27, focusing on revenue mobilisation, interest payments, and development expenditure to determine whether the improvement reflects genuine fiscal recovery or temporary fiscal relief.
An analysis of Pakistan’s tax revenue in FY25 presents a more encouraging picture. Against the budgeted Federal Board of Revenue tax revenue target of Rs12.97tr, the FBR collected Rs11.74tr, achieving approximately 90.5pc of the target. Despite falling short of the original target, FBR revenue grew by 26.3pc compared with the previous fiscal year.
