LAHORE: The past decade shows that Pakistan can meet revenue targets and improve development spending efficiency when reforms are enforced. The achievements of and 2023-24 and 2024-25 prove that fiscal credibility is possible.
Pakistan’s budgetary planning and development spending processes have remained a source of debate for economists and policymakers for years. In May 2015, analysts warned that Pakistan’s inability to meet its annual revenue collection targets and underutilisation of development funds stemmed largely from weak strategic planning, infrequent review meetings, and delayed responses to global and domestic shocks. Nearly a decade later, much has changed, but several of those concerns persist.
Since 2015, Pakistan’s track record of meeting Federal Board of Revenue (FBR) targets has been mixed. From the fiscal year (FY) 2015-16 to FY2021-22, Pakistan repeatedly missed its annual revenue targets, often forcing the government to revise down projections or seek emergency financing.
However, the tide appears to have turned in recent years. In FY2022-23, Pakistan achieved its revised revenue target, and in FY2023-24, the FBR even marginally surpassed its goal, collecting 100.5 per cent of the revised target. This marked one of the rare instances in the past decade where tax collection met expectations.
Last fiscal year showed promising trends as well as revenue collection was close to revenue goals. While some of this success is attributed to inflation and currency depreciation — which boost nominal tax revenues — the improved compliance, digitisation and stronger enforcement measures introduced in recent years have also played a role.
Pakistan’s development spending, particularly through the Public Sector Development Programme (PSDP), paints a more uneven picture. Over the past decade, utilisation of budgeted development funds has frequently lagged far behind allocations. In many years, only 50 per cent to 70 per cent of allocated funds were spent.
The reasons for this underutilisation are structural: delayed fund releases, bureaucratic red tape, financing bottlenecks, and a tendency to approve too many projects without ensuring consistent funding. In several years, fiscal stress and International Monetary Fund (IMF) programmes forced the government to slash PSDP allocations midyear, undermining long-term development objectives.
Yet, recent developments show improvement. FY 2024-25 recorded a record utilisation rate of around 96 percent, with over Rs 1 trillion spent on development projects. While this represents progress, it also highlights volatility; earlier in the year, only around 40 percent of allocated development funds had been utilised by April, reflecting Pakistan’s uneven ability to spend funds efficiently within fiscal timelines.
An even deeper concern is the declining share of development expenditure relative to GDP. In 2015, development spending stood at around 3.9 per cent of GDP. By FY2023-24, this had fallen to about 2.3 per cent, undermining long-term growth prospects despite headline improvements in utilisation rate.
Pakistan’s planning process has not fully addressed the criticisms levelled in 2015. Major shocks — such as global oil price volatility, currency depreciation and catastrophic floods — continue to derail fiscal plans, often without timely course correction.
Moreover, Pakistan’s “throw-forward” of incomplete development projects has ballooned, with IMF estimates suggesting that at current funding levels, it would take over a decade to complete existing projects. This inefficiency drains fiscal resources, discourages investors, and prevents critical infrastructure from contributing to economic growth.
Experts argue that Pakistan must institutionalise reforms that have shown early results. Realistic revenue targets should be coupled with rolling forecasts to incorporate market shifts, while tax administration reforms — digitisation, broadening of the tax base and simplification of compliance — should remain a priority
There is also a pressing need to create a contingency framework within budget planning. Natural disasters, commodity price shocks, and global economic downturns are now recurring realities, not exceptions.
However, until the government addresses structural weaknesses — such as chronic under-utilisation of funds, project delays, and unrealistic budget assumptions — fiscal planning will remain aspirational rather than transformative. A disciplined, transparent approach to revenue collection and project execution is not just a fiscal necessity; it is essential for Pakistan’s long-term economic stability and growth.
