WASHINGTON: The International Monetary Fund has projected Pakistan’s fiscal deficit to settle at approximately 3.2 per cent of the gross domestic product as part of its latest economic outlook. In its biannual Fiscal Monitor 2026 report, the global lender also noted a slight decline in the country’s primary surplus, which is expected to ease from 2.5 per cent. To maintain credible medium-term sustainability, the Fund has strongly advised Islamabad to phase out fiscally draining fuel subsidies and take decisive steps to broaden the national tax base.
The report highlights that while Pakistan’s revenue collection may have already reached its peak, the medium-term outlook remains stable yet on a downward trajectory through 2031. Despite a projected reduction in overall public debt, the IMF cautioned that debt levels remain significantly higher than the benchmarks established under the Fiscal Responsibility and Debt Limitation Act of 2005. This discrepancy poses a challenge to the government’s financial health, especially as public expenditures are expected to remain stubborn and difficult to trim in the coming years.
To navigate these fiscal pressures, the IMF has urged Pakistani authorities to address contingent liabilities and prioritize structural reforms that secure the country’s economic foundation. By moving away from broad-based subsidies and focusing on targeted financial support, the government can better manage its resources. As the international community monitors these developments, the focus remains on whether Pakistan can successfully implement these stringent fiscal measures to ensure a stable and predictable economic environment for the next decade.
