Pakistan’s tax-to-GDP ratio rose to 15.7% in fiscal year 2025, the highest level in more than two decades, driven largely by revenue measures linked to the ongoing IMF programme and a substantial jump in non-tax income, Profit reported.

According to the Ministry of Finance, the ratio increased by 3.2 percentage points compared to the previous year, marking the largest annual gain since FY2020, another year of IMF-backed fiscal tightening. However, the latest increase is the strongest since 2004, when the tax-to-GDP ratio had peaked at 18%.

In FY2024–25, non-tax revenues increase by 68%, outpacing the 26% jump in tax collections. This shift underscores the government’s focus on boosting overall revenues rather than pursuing sweeping tax reforms.

Non-tax revenue accounted for 4.6% of GDP—its highest share in 16 years—mainly due to increased profit transfers from the State Bank of Pakistan and higher collections from the Petroleum Development Levy (PDL). Additional contributions came from unexpected gains such as higher petroleum levy receipts and increased interest payments from public sector enterprises.

These revenue gains helped trim Pakistan’s fiscal deficit to 5.4% of GDP, the lowest in nine years, down from 6.8% in the previous fiscal year. The improved fiscal position reflects a deliberate shift towards strengthening state coffers through targeted levies and institutional contributions, Profit noted.