IMF Flags Revenue Shortfalls, Pension Pressures in Pakistan’s Fiscal Outlook

ISLAMABAD, October 17, 2025: The International Monetary Fund (IMF) has projected a gradual improvement in Pakistan’s fiscal position over the next five years, while warning of persistent revenue gaps and rising pressures from pension and health expenditures, which could undermine fiscal sustainability.

In its Fiscal Monitor 2025, released during the IMF-World Bank annual meetings, the Fund estimated Pakistan’s fiscal deficit for FY25 at 4.1pc of GDP, lower than last year’s 5.3pc but slightly above the government’s target of 3.9pc. The deficit is projected to decline gradually, reaching 2.8pc of GDP by FY30, conditional on continued reforms and disciplined spending.

The primary balance is forecast at 2.5pc of GDP for FY25 — a marginal improvement from 2.4pc last year — before stabilising at 2pc over the medium term. Despite stronger revenues following recent tax reforms under the IMF’s $7bn bailout programme, the tax-to-GDP ratio is expected to dip slightly to 15.7pc in FY26, before stabilising at 15.9pc by FY30.

The IMF cautioned against rising pension liabilities, projecting a 0.1pc increase in pension spending by 2030 and a 6.2pc surge in net present value of pension obligations by 2050. The Fund urged Islamabad to resist political pressure on subsidies, defence, and infrastructure spending, and instead focus on building fiscal buffers.

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While government expenditure is expected to decline to 18.8pc of GDP by FY30, Pakistan’s debt-to-GDP ratio, which stood at 71.6pc in FY25, is projected to gradually fall to 60.2pc by FY30 — still above the 60pc legal threshold breached for over 16 years.

The IMF concluded that without structural revenue mobilization and tighter fiscal discipline, Pakistan’s long-term economic stability remains vulnerable.