Abdul Ghani

Pakistan’s fiscal position strengthened during the first five months of FY2026. The government recorded a consolidated fiscal surplus of 0.8 percent of GDP in Jul–Nov, supported by higher revenues and a sharp reduction in debt servicing costs, according to the Monthly Economic Update and Outlook issued by the Finance Division.

Official data show that the fiscal outcome marks a significant improvement compared to a deficit of 0.04 percent of GDP recorded in the same period of the previous fiscal year. The improved fiscal performance reflects a combination of stronger revenue mobilisation and disciplined expenditure management, particularly on the current spending side.

During Jul–Nov FY2026, gross federal revenue receipts increased by 7.8 percent compared to the corresponding period last year. The growth was driven by higher tax and non-tax revenues, indicating improved collection performance amid stabilising economic conditions. At the same time, total expenditure declined by 6.2 percent, primarily due to a substantial reduction in mark-up payments.

The Finance Division reported that current expenditure fell by 6.4 percent during the period under review, largely reflecting a 21.3 percent decline in interest payments. The reduction in debt servicing costs was attributed to improved liquidity management and easing inflationary pressures, which helped contain borrowing requirements and interest-related outflows.

In contrast to the decline in current spending, development expenditure recorded a modest increase of 1.5 percent during Jul–Nov FY2026. The increase indicates a gradual reorientation of public spending towards development priorities, while maintaining overall fiscal discipline.

The primary balance also remained in surplus during the period. The government achieved a primary surplus of 2.8 percent of GDP in Jul–Nov FY2026, compared to a surplus of 2.9 percent in the same period last year. The sustained primary surplus underscores the government’s ability to meet its non-interest expenditure requirements through its own revenues.

The Finance Division noted that improved fiscal outcomes have contributed to broader macroeconomic stability by reducing financing pressures and supporting confidence in public finances. The containment of current expenditure, particularly interest payments, created fiscal space that can potentially be utilised for development spending and social sector support.

The report also highlighted that improved fiscal management has helped reinforce stability in other areas of the economy, including monetary conditions and external sector management. By maintaining a fiscal surplus and a strong primary balance, the government has reduced reliance on borrowing and helped support overall economic stabilisation efforts during FY2026.

According to the Finance Division, sustaining fiscal discipline will remain a key priority in the coming months to ensure macroeconomic stability and support economic recovery. The report emphasised the importance of maintaining revenue momentum and prudent expenditure management to preserve fiscal gains achieved during the first half of the fiscal year.

The improved fiscal performance in Jul–Nov FY2026 forms a critical component of the broader economic stabilisation narrative, complementing easing inflation, recovering industrial activity, and strengthening external buffers.

Credit: INP-WealthPk