Pakistan’s fiscal surplus drops 40pc in first quarter

Pakistan’s fiscal surplus drops 40pc in first quarter

Pakistan’s fiscal position weakened during the first quarter of the current financial year, with the overall budget surplus declining sharply despite government efforts to contain expenditure and reduce subsidies. Lower revenue collection and shrinking provincial cash surpluses contributed to the deterioration.

According to fiscal operations data released by the Ministry of Finance, the overall fiscal surplus dropped to 0.9 per cent of gross domestic product (GDP) during July-September 2026, compared with 1.7 per cent in the corresponding period of the previous fiscal year.

In monetary terms, the surplus fell by around 40 per cent to Rs1.273 trillion, against Rs2.12 trillion recorded in the first quarter of the previous year, highlighting growing pressure on the government’s fiscal position.

The primary surplus, which represents the difference between government revenue and expenditure excluding interest payments on debt, also recorded a decline. It stood at 2.1pc of GDP, down from 2.8pc a year earlier. In absolute terms, the primary surplus decreased by 15pc to Rs2.97 trillion from Rs3.5 trillion during the same period last year.

The decline in fiscal performance was accompanied by a reduction in overall government revenue. Total revenue fell to 4.2pc of GDP in the first quarter, compared with 4.9pc in the corresponding period last year.

Notably, revenue also declined in absolute terms, falling to Rs6.004 trillion from Rs6.2 trillion. The decrease came despite inflationary pressures and nominal economic growth, which would ordinarily support an increase in government receipts.

Both tax and non-tax revenue contributed to the weaker performance, although the decline in non-tax receipts was more pronounced.

Non-tax revenue dropped to 1.8pc of GDP, equivalent to Rs2.6 trillion, by the end of September 2026, compared with 2.4pc of GDP, or Rs3.046 trillion, in the same period a year earlier.

The decline largely reflected lower profits transferred by the State Bank of Pakistan (SBP) to the government. SBP profits fell to Rs1.933 trillion during the first quarter from Rs2.43 trillion in the corresponding period last year, reducing an important source of non-tax income.

However, petroleum-related receipts provided some support to government revenue. These collections increased slightly to Rs382 billion from Rs372 billion over the same period.

Meanwhile, tax revenue showed a mixed trend. Although tax collections increased in absolute terms to Rs3.387 trillion from Rs3.153 trillion a year earlier, their share in GDP declined to 2.4pc from 2.5pc.

The figures indicate that the government’s revenue performance remains under pressure, with falling non-tax receipts and a lower revenue-to-GDP ratio weakening its fiscal position despite an increase in nominal tax collections.

The decline in both overall and primary surpluses also underscores the challenges facing the government in maintaining fiscal discipline, managing debt-related costs and improving revenue mobilisation during the current financial year.