Farooq Awan

Pakistan recorded a strong primary surplus of Rs2.9 trillion during the first quarter of FY2026, reflecting improved fiscal discipline and effective resource management in line with IMF program commitments. According to the Finance Division’s Monthly Economic Update & Outlook (October 2025), total government revenues increased substantially on account of strong tax and non-tax inflows, while expenditures were kept within budgeted limits.

The report said the government’s fiscal consolidation drive, coupled with higher revenues from petroleum levies and SBP profit transfers, had significantly improved fiscal indicators. The primary balance showed a surplus of Rs2,938.9 billion during July–August FY2026 compared to Rs49.4 billion during the same period last year. Overall fiscal balance recorded a surplus of Rs1,509.2 billion, reversing a deficit of Rs648.8 billion in the corresponding period of FY2025. The improvement was attributed to strong revenue performance, expenditure restraint, and effective cash management.

FBR’s revenue collection during July–September FY2026 stood at Rs2,884.4 billion, marking an increase of 12.5 percent over last year. Non-tax revenues increased sharply, led by SBP profits, dividends, defense receipts, petroleum levies, and the Gas Infrastructure Development Cess. The Finance Division said this fiscal performance reflected improved governance, enhanced revenue administration, and a commitment to prudent financial management under the IMF program. It added that better fiscal management had reduced reliance on domestic borrowing, freeing liquidity for the private sector.

Economists said that sustaining a primary surplus over consecutive quarters would help Pakistan reduce its debt-to-GDP ratio and strengthen fiscal sustainability. “This marks an important shift toward long-term fiscal health and credibility,” they noted. The report cautioned, however, that maintaining fiscal discipline would require careful expenditure prioritization, continued tax reforms, and rationalization of subsidies. Fiscal authorities were advised to avoid populist spending and maintain focus on development expenditures with high economic returns.

The Finance Division said fiscal sustainability was being reinforced by improvements in the external sector, with stable reserves and contained current account deficits providing a supportive macroeconomic backdrop. It also emphasized that post-flood rehabilitation and reconstruction expenditures were being managed within existing fiscal allocations, helping to avoid unplanned deficits. “The fiscal framework remains fully aligned with IMF program objectives,” it said.

The report added that effective fiscal coordination with provincial governments was contributing to better overall balance management. Continued progress on privatization, state-owned enterprise reform, and digital governance was expected to further strengthen fiscal space. With improved fiscal and external indicators, Pakistan’s economic outlook for FY2026 remains positive. The Finance Division projected that fiscal discipline, strong revenue growth, and prudent expenditure policies would continue to underpin macroeconomic stability.

Credit: INP-WealthPk