ISLAMABAD: Pakistan recorded a fiscal surplus of 0.9% of gross domestic product (GDP), amounting to Rs1.3 trillion, during the first quarter of fiscal year 2026-27 (FY27), compared with 1.7% of GDP, or Rs2.1 trillion, in the corresponding period last year.
According to an economic analysis released on November 13, 2026, the country's primary surplus stood at 2.1% of GDP, slightly exceeding the International Monetary Fund's (IMF) full-year FY27 target of 2%.
However, the first-quarter fiscal performance is generally stronger due to seasonal transfers of profits from the State Bank of Pakistan (SBP).
The year-on-year decline in the fiscal surplus was primarily driven by lower revenues, including a 20% reduction in SBP profits, which fell to Rs1.9 trillion.
Total government expenditure increased by 16% year-on-year to Rs1.7 trillion in interest payments, reflecting a 23% rise in debt servicing costs amid higher interest rates following the 100-basis-point policy rate increase in May 2026.
The average yield on Treasury bills during the first quarter of FY27 stood at 11.6%, compared with 10.8% in the same period last year. Meanwhile, domestic debt increased by 9% year-on-year in August 2026.
On a quarter-on-quarter basis, interest payments declined by 15%, largely due to seasonal factors and debt maturity schedules, which are concentrated in the December and June quarters.
Excluding interest payments, overall government expenditure increased by 12% year-on-year during the quarter.
Meanwhile, tax revenues grew by 7% to Rs3.4 trillion, with Federal Board of Revenue (FBR) collections rising 7% to Rs3.1 trillion.
The primary surplus amounted to Rs3 trillion, or 2.1% of GDP, compared with Rs3.5 trillion, or 2.8% of GDP, in the corresponding period of the previous fiscal year.
On the expenditure side, Public Sector Development Programme (PSDP) spending increased by 59% year-on-year to Rs468 billion, while defence expenditure rose 11% to Rs495 billion.
However, subsidies and grants declined by 17% to Rs366 billion.
The fiscal surplus of Rs1.3 trillion, combined with net external financing of Rs609 billion and non-bank financing of Rs592 billion, enabled the government to retire Rs2.5 trillion in bank borrowing.
Gross external inflows amounted to Rs1.25 trillion, including Rs910 billion in programme loans, against external debt repayments of Rs638 billion.
No proceeds from privatisation were recorded during the first quarter of FY27, compared with Rs4 billion in the fourth quarter of FY26.
The economic analysis projected Pakistan's fiscal deficit at 3.6% of GDP for FY27, while the primary surplus is expected to reach 2% of GDP.
