Farooq Awan

Pakistan recorded a fiscal surplus during the first four months of fiscal year 2025–26, reflecting improved revenue performance and controlled expenditure, according to the Monthly Economic Update and Outlook released by the Finance Division for December 2025.

The report stated that the consolidated fiscal balance posted a surplus of 1.0 percent of gross domestic product (GDP) during July–October FY2026, compared to a surplus of 0.4 percent recorded in the same period last year. The improvement was primarily attributed to stronger revenue mobilization and disciplined spending by the federal government.

During the review period, gross federal revenues increased by 7.7 percent, while total expenditures declined by 4.8 percent, resulting in a notable improvement in overall fiscal performance. The primary balance, which excludes interest payments, also remained positive at 2.7 percent of GDP, indicating strengthened fiscal management and reduced reliance on borrowing to finance government operations.

According to the report, the Federal Board of Revenue (FBR) collected Rs4,734 billion during July–November FY2026, registering a growth of 10.2 percent compared to the same period last year. Direct taxes showed an increase of 10.5 percent, while sales tax collection rose by 8.5 percent. Federal excise duty and customs duty also posted gains of 18.2 percent and 10.1 percent, respectively, reflecting improved compliance and economic activity.

The report noted that fiscal consolidation efforts were supported by controlled current expenditure and better expenditure prioritization. Government spending remained focused on essential areas while maintaining discipline in non-development outlays. At the same time, development spending was managed in a way that supported economic activity without putting undue pressure on the fiscal balance.

Improved fiscal outcomes were also supported by stronger non-tax revenues, including higher earnings from state-owned enterprises and increased collections from various administrative sources. The combined impact of higher revenues and expenditure control helped contain borrowing requirements and strengthened overall fiscal sustainability.

The Finance Division highlighted that improved fiscal performance has contributed to enhanced macroeconomic stability, reinforcing confidence among investors and development partners. The improved fiscal position also supported the government’s broader economic stabilization efforts under the ongoing reform programme.

Looking ahead, the report noted that maintaining fiscal discipline remains a key priority. Sustained revenue growth, effective expenditure management and continued structural reforms are essential to preserving fiscal stability and supporting long-term economic growth.

Credit: INP-WealthPk