A recent assessment by the International Monetary Fund (IMF) presents a mixed outlook for the country’s fiscal management, highlighting gradual improvements in revenue mobilisation alongside deepening concerns over widening budget deficits and rising public debt dependency.
According to the report, government revenue as a share of gross domestic product (GDP) is expected to improve modestly in the current fiscal year. However, this positive trend is being offset by a simultaneous and more pronounced increase in public expenditure, which is placing additional pressure on overall fiscal stability. The IMF cautions that without sustained structural reforms, the gains in revenue performance may prove insufficient to counterbalance rising spending commitments.
A key feature of the analysis is the changing composition of public expenditure. While social protection and welfare spending saw some moderation in the previous fiscal year, projections indicate a renewed rise in the current period. This is partly attributed to elevated global commodity prices, particularly crude oil, and higher import-related costs. Volatility in international energy markets, exacerbated by geopolitical tensions in the Middle East, has further intensified fiscal pressures, particularly through increased subsidy obligations.
On the revenue side, growth is described as steady but relatively slow. Although the tax-to-GDP ratio is projected to improve slightly, the report stresses that this progress remains fragile. Strengthening tax administration, broadening the tax base, and reducing evasion are identified as essential measures to ensure sustainable revenue expansion. Without such reforms, the fiscal position may remain structurally constrained.
The most concerning development, however, is the persistent rise in the budget deficit. The IMF notes that deficit levels have been gradually increasing in recent years and are expected to continue on an upward trajectory in the coming fiscal periods. This trend is likely to heighten reliance on borrowing, both domestic and external, thereby increasing debt servicing obligations. A growing portion of new borrowing is already being used to repay existing liabilities, raising concerns over long-term debt sustainability and the potential crowding-out of development expenditure.
Public expenditure patterns also raise questions about development effectiveness. While allocations to infrastructure projects continue to rise, concerns remain over implementation efficiency and the extent to which such spending translates into tangible economic returns. Similarly, insufficient investment in education and healthcare could undermine long-term human capital development.
The overall fiscal indicators are summarised below:
| Indicator | FY 2023–24 | Last 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 emphasises that improved political stability and consistent policy implementation could enhance the investment climate, encouraging greater private sector participation. This, in turn, would support job creation and broaden the tax base. However, achieving these outcomes will require disciplined expenditure management, sustained tax reform, and a more strategic approach to debt management.
In conclusion, while revenue performance shows signs of gradual improvement, the expanding deficit and rising debt burden pose significant medium- to long-term risks to fiscal sustainability unless corrective measures are promptly and effectively implemented.