Pakistan’s Tax-to-GDP Ratio Likely to Hit 7-Year High Next Fiscal Year

Pakistan’s tax-to-GDP ratio (including petroleum development levy) in tax revenues is projected to reach 11.5 percent in fiscal year 2024-25. According to Topline Securities, this will be the highest in seven years. For the last five years, this ratio has remained at 9.7 percent of GDP. To recall, petroleum development levy used to be classified as tax revenue until FY20. The FBR tax-to-GDP ratio has remained between 8.4 and 9.8 percent during the last six years. In the fiscal year 2024, Pakistan’s GDP increased by 2.38 percent, with strong growth in the agriculture sector which expanded by 6.25 percent compared to 2.27 percent growth in last year. While both the industrial and services sectors grew by 1.21 percent. The GDP, valued at current market prices, reached Rs 106,045 billion ($375 billion), with a 26.4 percent increase from the previous year’s Rs. 83,875 billion ($338 billion). The per capita income rose to $1,680, from $1,551 in the previous year, driven by improved economic activity and a stable exchange rate. The investment-to-GDP ratio for FY 2024 remained at 13.14 percent, a decrease from 14.13 percent in FY 2023, attributed to a global slowdown, political instability in the country along restrictive macroeconomic policies. Gross Fixed Capital Formation (GFCF) stood at Rs. 12,122.5 billion, an 11.4 percent increase over the FY 2023. Both private and public investments grew by 15.8 percent and 18.2 percent, respectively. Nevertheless, the national saving rate remained steady, recorded at 13.0 percent in FY 2024.