Fiscal performance January–August 2025 shows progress, but structural challenges remain strong

Preliminary data from the Ministry of Finance for the period January–August 2025 show a stable performance in revenues and spending discipline, but comparisons with the same period of last year and indicator analysis highlight significant challenges requiring strategic attention.

Budget revenues above plan, but structurally dependent on consumption and wages

Total revenues for the eight-month period reached 498.6 billion ALL, exceeding 101% of the planned target and marking a 7.3% increase compared to January–August 2024.
The main growth drivers are personal income tax (+26.3%) and net VAT (+20.7%), indicating stronger domestic consumption and partial formalization of the economy.

However, the concentration of revenues on consumption and wage taxation creates medium-term vulnerability, as any slowdown in consumption or rise in inflation could significantly reduce fiscal inflows.
Profit tax revenues grew by only 3.6%, signaling moderate business profitability and suggesting that economic growth is not yet being driven by productivity or private investment.

Customs administration and special funds perform, but face limitations

Customs revenues reached 99% of the plan, but customs duties only 92.1%, suggesting import restrictions or trends of tax evasion and informal activity.
Mining royalties achieved only 84.7% of the plan, reflecting heavy dependence on international markets and the lack of stabilizing measures.
Special funds (social and health insurance) rose 12.5%, indicating improved contribution collection.
Despite exceeding plans, contributor participation remains uneven, and high-informality sectors continue to threaten their stability.

Public spending grows steadily, but capital investments face delays

Total expenditures reached 457.4 billion ALL, 12.7% higher than January–August 2024, driven by rising current spending and higher debt servicing costs.
Current expenditures (407.9 billion ALL, +12.1%) dominate the budget, leaving limited space for long-term development investments.
Capital expenditures increased 15% compared to 2024 but achieved only 30% of the annual plan, delaying their economic impact.
Chronic delays in capital spending not only reduce the effectiveness of fiscal policy but also increase the risk of end-year inefficient fund allocation.

Fiscal surplus maintained but declining

The fiscal surplus for January–August stands at 41.2 billion ALL, but this is 29.8% lower than a year earlier, reflecting rising pressure on public finances.
A lower surplus signals growing needs for emergency financing, reducing fiscal flexibility and requiring more cautious management to avoid a rise in public debt.

Structural weaknesses and medium-term risks

The economy remains sensitive to the structure of its revenues, showing significant reliance on consumption and wage taxation. This dependency increases budget risk during economic slowdowns, as any drop in consumption or wages directly affects fiscal revenues.
Meanwhile, low and delayed capital spending limits its role in fostering economic development and employment.
Mining royalties and customs duties remain unstable, creating revenue volatility and uncertainty for medium-term fiscal planning.
As current spending continues to rise, the growing share allocated to wages and pensions may restrict the government’s ability to invest in strategic projects that enhance the economy’s productive capacity.

In summary, while January–August 2025 shows positive revenue performance and disciplined spending, delays in capital investments, a declining surplus, and heavy dependence on consumption and wages underline that fiscal stability and economic effectiveness could be tested by year-end.
These trends demand strong policy action to address structural weaknesses and strengthen budget sustainability.