IMF Warns of Rising Govt Spending and Debt Load in Pakistan — Here’s What to Expect in 2025

Pakistan’s fiscal path is set to face intensified pressure in 2025, with the International Monetary Fund (IMF) projecting a notable surge in government spending and a higher debt-to-GDP ratio, alongside widening financial obligations. These insights are drawn from the IMF’s latest “Fiscal Monitor: Fiscal Policy under Uncertainty” report, which underscores the country’s fragile economic outlook for 2025.

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📊 Government Spending and Public Debt Surge

The Pakistan IMF debt outlook 2025 reveals that government expenditure is expected to increase from 19.4% of GDP in 2024 to 21.6% in 2025 — a sharp 2.2% jump. This growth in public spending reflects rising fiscal demands, driven by IMF-backed reforms, structural adjustments, and essential development projects.

At the same time, Pakistan’s gross public debt is forecast to rise from 70.1% in 2024 to 73.6% in 2025, while net government debt is projected to hit 67.5%, signaling tightening fiscal space. This aligns with the broader concern over Pakistan’s debt management strategy and its ability to meet IMF compliance without destabilizing macroeconomic stability.

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💰 Revenue Recovery Shows Promise

The IMF projections for Pakistan suggest a promising jump in government revenues:

• 2024: 12.6% of GDP
• 2025: 15.9% of GDP
• 2026 forecast: 15.2% of GDP

This growth is linked to tax revenue reforms, increased compliance, and efforts to broaden the tax base — all part of Pakistan’s structural reforms under IMF programs.

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📉 Deficit Shrinking, But Debt Pressures Remain

The primary balance (excluding interest payments) is projected to improve to 2.1% of GDP in 2025, from 1% in 2024, while the fiscal deficit narrows to -5.6%, compared to -6.8% in 2024. While this suggests progress in fiscal consolidation, the country’s high debt-to-GDP ratio and external repayment pressure remain key risks.

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🏦 Key Fiscal and Debt Indicators to Watch

• Debt maturity profile (2025): 15.9% of GDP
• Interest rate–growth differential (2025–2030): -1.4%
• Non-resident holdings of government debt (2024): 31.5%

These macroeconomic indicators reflect Pakistan’s external vulnerabilities, especially in global capital markets.

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⚠️ Why This Matters for Pakistan’s Economic Stability

With rising debt, elevated public expenditure, and IMF fiscal benchmarks looming, Pakistan’s economic challenges in 2025 will center on balancing macroeconomic discipline and growth. Issues such as inflation, energy subsidies, a struggling currency, and limited fiscal space will require urgent policy response.

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🔄 The Tightrope Between Reform and Reality

As Pakistan recommits to IMF reforms, the success of its fiscal strategy depends on sustained policy execution, foreign investor confidence, and timely external funding. While debt consolidation and revenue enhancement are underway, the budget deficit and public debt burden require close monitoring.

For sustainable growth, Pakistan’s fiscal policy must evolve — focusing on export diversification, investment in local industries, and transparent governance to reduce dependence on non-resident debt holders.

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📢 Stay Informed

Follow DailyForex.pk for expert coverage on Pakistan’s IMF programs, public debt trends, government spending forecasts, and fiscal policy developments shaping the economy in 2025.