Pakistan posts record Rs3.5tr primary surplus in 1QFY26

November 08, 2025 (MLN): Pakistan recorded quarterly primary surplus of Rs3.5 trillion in the first quarter of FY26 (1QFY26) while the overall budget surplus stood at Rs2.1tr, equivalent to 1.6% of GDP, slightly lower than the 1.7% recorded in the same period last year.

This performance is attributed to improved fiscal management- controlled development spending and higher non-tax receipts, particularly from the State Bank of Pakistan (SBP).

During the quarter, FBR tax collection reached Rs2.88tr, marking a 13% YoY increase compared to Rs2.56tr in 1QFY25.

The growth was driven by improved enforcement measures and inflation-led expansion in indirect taxes.

However, on a quarterly basis, FBR revenue dropped 12% from 4QFY25 due to seasonal slowdown in collection after the fiscal year-end.

Meanwhile, non-tax revenues slightly declined by 1% YoY to Rs3tr, as lower petroleum levy receipts and a moderation in profit transfers offset the SBP dividend gains.

Total expenditure in 1QFY26 rose 12% YoY to Rs2.78tr on the back of rising debt servicing costs.

Mark-up payments increased 5% YoY to Rs1.38tr due to elevated borrowing rates and the government’s focus on longer-tenor debt.

Defense expenditure also increased by 9% YoY to Rs447 billion, while spending on pensions and grants saw modest growth. However, development expenditure (PSDP) remained restrained at Rs41bn.

With higher revenues and constrained spending, the government posted an overall fiscal surplus of Rs2.12tr in 1QFY26, up from Rs1.9tr in the same quarter last year.

The primary balance which excludes interest payments registered a record surplus of Rs3.5tr, up 9% YoY. As a percentage of GDP, the primary surplus stood at 2.7%, slightly below last year’s 2.8%.

The provinces collectively posted a surplus of Rs781bn, compared to Rs360bn in 1QFY25, an increase of 117% YoY.

Punjab led the pack with a Rs209bn surplus, followed by Sindh (Rs77bn), Khyber Pakhtunkhwa (Rs54bn), and Balochistan (Rs101bn).

Provincial current expenditures stood at Rs1.37tr, primarily allocated to flood-related relief and administrative costs, while development spending was recorded at Rs400bn.

Pakistan’s total financing requirement turned negative at Rs-2.12tr, as the surplus reduced borrowing needs.

The data shows net external financing of Rs-38.9bn (indicating repayment), while domestic financing also declined by Rs2.08tr.

Within domestic sources, the government retired Rs2.19tr of bank debt, while non-bank borrowing added Rs112bn through savings schemes and Sukuk issuance.

The budget balance, representing the difference between total revenues and total expenditures, stood at 1.6% of GDP, marginally lower than 1.7% in the same period last year.

Copyright Mettis Link News