ISLAMABAD (The Thursday Times) — Pakistan’s federal and provincial governments together ran a fiscal surplus of Rs1.27 trillion, or 0.9% of GDP, in the first quarter of the 2026-27 financial year, provisional Finance Division figures show, down from Rs2.12 trillion, or 1.7% of GDP, a year earlier.
The primary balance, which leaves out interest payments, showed a surplus of Rs2.97 trillion, or 2.1% of GDP, in July to September, against Rs3.50 trillion, or 2.8% of GDP, in the same months of 2025. Analysts noted that this already tops the primary surplus of 2% of GDP expected for the full year, though the first quarter is usually the strongest because the State Bank of Pakistan hands its profits to the government early in the year.
Revenue down, spending up
Total revenue fell about 3% to Rs6 trillion. Tax revenue rose about 7% to Rs3.39 trillion, made up of Rs3.09 trillion in federal taxes and Rs300.93 billion collected by the provinces. Non-tax revenue, which includes the central bank’s profits, fell about 14% to Rs2.62 trillion from Rs3.05 trillion.
Total spending rose about 16% to Rs4.73 trillion from Rs4.08 trillion. Interest payments climbed about 23% to Rs1.70 trillion from Rs1.38 trillion as borrowing costs rose. Development spending and net lending jumped about 61% to Rs474.85 billion from Rs295.06 billion, and defence spending rose about 11% to Rs495.37 billion.
Interest payments, at 1.2% of GDP, were more than three and a half times what the government spent on development in the quarter. Earlier this month, figures showed the federal government had spent only a tenth of its Rs1 trillion development budget in the first four months of the year.
Paying down bank debt
Because it ran a surplus, the government repaid more domestic debt than it raised. Domestic financing was a net negative Rs1.88 trillion, including net repayments of Rs2.47 trillion to banks, while borrowing from non-bank sources rose to Rs592.10 billion from Rs112.06 billion.
External sources provided a net Rs608.86 billion in the quarter, against a net outflow of Rs38.87 billion a year earlier. No privatisation proceeds were recorded in either period. Pakistan paid $14.4 billion on its foreign debt in the last financial year.
As a share of GDP, total revenue fell to 4.2% from 4.9%, and tax revenue to 2.4% from 2.5%. The figures put GDP for the year at Rs143.60 trillion, against Rs126.87 trillion in 2025-26.
The fiscal data comes as weekly inflation eased on lower fuel prices, though the annual rate stayed at 11.21%, and as the government leans more on Islamic debt, with Sukuk issuance passing Rs10 trillion.
