The International Monetary Fund (IMF) has issued a fresh assessment of the government’s overall fiscal management, highlighting a mixed outlook in which modest revenue improvements are overshadowed by growing concerns over expenditure pressures and an expanding budget deficit.
According to the Fund’s latest analysis, government revenue as a share of gross domestic product (GDP) is projected to rise gradually in the current fiscal year. However, this positive development is being accompanied by a steady upward trend in the overall budget deficit, raising questions about medium-term fiscal sustainability.
The report notes significant shifts in the structure of public expenditure in recent years. While welfare-related spending had declined slightly in the previous fiscal year, it is expected to rebound in the current year. Rising global commodity prices—particularly in energy and imported goods—are placing additional strain on public finances. Escalating geopolitical tensions in the Middle East have further contributed to higher import costs, intensifying fiscal pressure. The IMF cautions that without appropriate alignment of domestic prices with international market conditions, subsidy burdens could increase further.
On the revenue side, the outlook is comparatively more optimistic. Although revenue collection as a proportion of GDP remained stagnant in the previous fiscal year, it is expected to improve in the current period. The IMF suggests that continued implementation of revenue reforms, along with sustained political stability, could strengthen this upward trajectory in the coming years.
However, the most pressing concern identified in the analysis is the persistent rise in the budget deficit. The data indicate a gradual but consistent increase in deficit levels over recent years, with projections suggesting a further widening ahead. This trend is likely to deepen reliance on borrowing, thereby increasing debt servicing obligations and placing additional constraints on development spending.
The IMF also highlights concerns regarding the composition of public expenditure. Although overall spending is increasing, investment in key human development sectors such as education and health remains below desired levels. This imbalance could slow progress in human capital development and long-term productivity growth. Furthermore, a growing share of external borrowing is being used to service existing debt, raising concerns about debt sustainability and fiscal flexibility.
The overall trends presented in the IMF assessment are summarised below:
| Indicator | FY2023–24 | Previous Fiscal Year | Current Fiscal Year (Forecast) | Next Fiscal Year (Forecast) |
|---|---|---|---|---|
| Budget deficit (% of GDP) | 3.7 | 3.8 | 3.9 | 4.5 |
| Revenue (% of GDP) | 7.7 | 7.7 | 8.9 | 9.1 |
| Government expenditure (% of GDP) | 11.4 | 11.4 | 12.9 | 13.6 |
The report further observes that improvements in political stability under an elected administration could help strengthen the investment climate. This, in turn, may support business expansion and enhance revenue generation. However, the IMF emphasises that such outcomes depend heavily on sustained revenue reforms and disciplined expenditure management.
In conclusion, while the revenue outlook shows signs of gradual improvement, the simultaneous rise in expenditure and debt dependence presents a clear risk to long-term fiscal stability. Without targeted reforms and tighter fiscal control, the widening deficit could pose a significant challenge to macroeconomic resilience in the years ahead.