The International Monetary Fund (IMF) has delivered a mixed assessment of the government’s fiscal position, highlighting both encouraging and concerning trends in its latest report. While modest improvements in revenue generation are anticipated over the coming years, the overall fiscal deficit is projected to widen steadily, driven by rising expenditure pressures, import-related costs, and weakening external financing flows.
According to the IMF, government revenue as a share of gross domestic product (GDP) is expected to rise gradually. In contrast, total public spending is also set to increase, but not at a pace sufficient to prevent an expansion of the fiscal deficit. The Fund further noted that although public expenditure has development-oriented intentions, its growth remains relatively subdued compared with many peer economies.
Fiscal Indicators at a Glance
| Fiscal Year |
Revenue (% of GDP) |
Expenditure (% of GDP) |
Fiscal Deficit (% of GDP) |
| 2023–24 |
7.7 |
11.4 |
3.7 |
| 2024–25 |
7.7–7.8* |
11.4 (previous est.) |
3.8 |
| 2025–26 |
8.9 |
12.9 |
3.9 |
| 2026–27 |
9.1 |
13.6 |
4.5 |
| 2027–2030 |
~9.5 |
— |
5.0 |
*Approximate continuation of the previous fiscal trend.
Rising Deficits Despite Revenue Gains
The IMF projects that the fiscal deficit will gradually widen from 3.7 per cent of GDP in 2023–24 to 3.8 per cent in the following fiscal year, before reaching 3.9 per cent in the current cycle. It is then expected to rise more sharply to 4.5 per cent in 2026–27 and potentially touch 5 per cent between 2027 and 2030.
This deterioration is largely attributed to rising government expenditure, particularly linked to increased import costs, partly driven by geopolitical tensions in the Middle East. The IMF warned that without adequate adjustment of domestic prices to international levels, subsidy burdens could escalate further, putting additional pressure on public finances.
Revenue Growth and Structural Reforms
On the revenue side, the IMF expects gradual improvement. After falling to 7.7 per cent of GDP in the previous fiscal year, revenue is projected to rise to 8.9 per cent in the current year and 9.1 per cent in the next. Longer-term projections suggest a stabilisation around 9.5 per cent of GDP.
Another IMF assessment highlights that a shift towards greater political stability following the formation of an elected government could improve the investment climate. This, in turn, may stimulate business activity and strengthen tax revenues. The continuation of ongoing tax reform initiatives is also identified as a key factor that could support fiscal consolidation.
Spending Pressures and External Financing
Public expenditure, which declined to 11.4 per cent of GDP in the previous year, is projected to rise to 12.9 per cent and then 13.6 per cent in the following fiscal year. However, the IMF expressed concern that spending increases in critical sectors such as education and healthcare remain insufficient to significantly improve service quality.
At the same time, weaker revenue performance is increasing reliance on external borrowing. A substantial portion of new foreign loans is reportedly being used to service existing debt obligations, thereby limiting fiscal space for development-oriented investment.
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