Pakistan has reported a significant budget surplus of Rs. 2.1 trillion during the first quarter of fiscal year 2026, equal to about 1.6 percent of the country’s GDP. This turnaround follows a budget deficit recorded in the previous fiscal quarter.
The improvement in Pakistan’s finances is largely attributed to a major profit payment from the State Bank of Pakistan (SBP). Analysts say the central bank’s profit of approximately Rs. 2.42 trillion, resulting from extensive market operations, played a key role in strengthening government finances.
The primary balance, which excludes interest payments, also showed a surplus of 2.7 percent of GDP. However, excluding the SBP’s one-time contribution, the adjusted figures reveal a small deficit of 0.2 percent and a primary surplus of 0.8 percent. This indicates that underlying fiscal pressures remain despite the overall improvement.
The government used part of the surplus to pay off around Rs. 2 trillion in domestic debt and Rs. 38 billion in external loans during the quarter. Interest payments totaled Rs. 1.4 trillion, representing 48 percent of tax revenue collected by the Federal Board of Revenue, slightly lower than the 51 percent recorded in the same period last year.
Development spending under the Public Sector Development Program (PSDP) rose by 7 percent year-on-year to Rs. 295 billion, while defense spending increased by 9 percent. Transfers to provincial governments accounted for 56.3 percent of total tax revenue, remaining consistent with the previous year.
Economists warn that Pakistan’s full-year budget deficit could reach around 4.6 percent of GDP, higher than the government’s target of 3.9 percent. Rising expenditures, flood recovery efforts, and slower economic growth may contribute to this gap, highlighting the ongoing fiscal challenges facing the country.
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This report reflects a mixed picture: while Pakistan has achieved a short-term surplus, careful planning will be needed to maintain fiscal stability throughout FY26.
