The federal budget for 2025-26 has been announced recently. This has led to wide-ranging discussions in the media about the issues not addressed or focused on in the budget, the quality and yield from taxation measures to achieve the revenue targets and the appropriateness of the revealed expenditure priorities.

However, there is need to focus first on the budgetary outcome in 2024-25. There is, no doubt, that this has been an exceptionally good year. The outcome of the size of the consolidated budget deficit is 5.6 percent of the GDP. This is lower than the targeted deficit of 5.8 percent of the GDP at the start of the year. Seldom has this happened.

Also, there has been a big reduction in the budget deficit in 2024-25 of 1.2 percent of the GDP in relation to the level in 2023-24. This will ensure less rapid increase in the public debt. There is need to commend and appreciate the better management of public finances by both the federal and the provincial governments.

Throughout the year, the growing deficit in FBR revenues in relation to the target level was being highlighted. Despite the eventual shortfall of Rs 1070 billion, how has the budget deficit target been more than achieved? This is due to a reduction in current expenditure in relation to the target level by over Rs 800 billion, due primarily to a big containment in debt servicing, with the sharp fall in interest rates. Further, the spending on PSDP projects has been restricted by over Rs 540 billion.

Turning to the budget for the forthcoming financial year, we look forward to the same quality of financial management. There is, in fact, an ambitious commitment to bring down further the consolidated budget deficit to 3.9 percent of the GDP. This will imply a quantum reduction of 1.7 percent of the GDP in relation to this year’s deficit. If achieved, it will be one of the lowest budget deficits over the last many years. Also, the primary surplus will remain high at above 2 percent of the GDP.

The fundamental question is how this target of big deficit reduction will be achieved in 2025-26? The FBR........

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