Shafaqna Pakistan: Pakistan recorded a third consecutive primary budget surplus of Rs3.6 trillion in the last financial year, significantly improving its fiscal position and meeting the International Monetary Fund’s (IMF) primary surplus requirement.
The surplus was achieved despite lower-than-targeted tax revenues, with stronger petroleum levy collections and tighter control over government spending helping offset the revenue shortfall. Provincial cash surpluses were also slightly below expectations.
According to the Ministry of Finance’s fiscal operations summary, the federal government recorded a budget deficit of Rs4.8 trillion during fiscal year 2025-26, around Rs1.7 trillion below the target.
The better-than-expected fiscal performance was largely attributed to Rs1.3 trillion in lower-than-budgeted interest payments, Rs101 billion in additional petroleum levy collections and Rs82 billion in reduced federal development spending.
The improved fiscal position also helped slow the growth of public debt, which increased by 7 per cent during the financial year, compared with double-digit growth previously.
However, after improving the fiscal situation under the IMF umbrella, the government of Prime Minister Shehbaz Sharif now faces the bigger challenge of providing relief to people who have borne the brunt of fiscal consolidation since 2022.
The unadjusted primary budget surplus – the revenues after paying interest cost – surged to Rs3.63 trillion, exceeding the IMF target by Rs464 billion. The primary surplus was equal to 2.6% of GDP. The IMF had set the primary surplus target of Rs3.16 trillion. Officials said that even after applying some adjustments on account of foreign project loans and higher circular debt flow, the government was in a comfortable position to meet the IMF condition.
An IMF mission is expected to visit Islamabad in the third week of September to review economic performance for the last fiscal year, undertake a comprehensive assessment of Pakistan’s economy under Article-IV and recommend the release of the fifth loan tranche of $1.1 billion.
The overall budget deficit, inclusive of provincial savings, remained at Rs3.3 trillion, Rs1.7 trillion less than the target set in the budget. The federal deficit was Rs4.8 trillion, calculated after excluding provincial cash surpluses, better than the budget target by Rs1.74 trillion.
The four provincial governments generated Rs1.45 trillion cash surplus, missing the IMF condition by just Rs14 billion. The Punjab government saved Rs914 billion, Sindh had a cash surplus of Rs350 billion, Khyber-Pakhtunkhwa (K-P) Rs165 billion and Balochistan Rs21 billion in the last fiscal year.
The provincial governments exceeded their revenue collection condition by the IMF by Rs18 billion, collecting little over Rs1.2 trillion in taxes.
The Federal Board of Revenue (FBR) collected Rs13 trillion in the last fiscal year, nearly Rs1 trillion less than the IMF’s revised target. The FBR’s tax-to-GDP ratio remained stagnant at 10.3%. The 11% increase in FBR tax collection compared to the preceding year was equal to nominal GDP growth, suggesting the FBR could not materialise revenue on account of Rs700 billion additional tax and enforcement measures.
The non-tax revenue collection target was also missed by Rs63 billion. Non-tax revenue amounted to nearly Rs5.1 trillion, including Rs2.4 trillion profits received from the central bank.
Petroleum levy collection surged to Rs1.567 trillion, a 28% increase compared to the previous year. The collection was Rs101 billion more than the IMF target. Excessive collection was equal to 25 days of Rs80 per litre relief on petrol and high-speed diesel.
For the current fiscal year, the government has agreed to a Rs1.7 trillion petroleum levy collection target with the IMF, which would require keeping levy rates at Rs80 per litre throughout the fiscal year despite higher fuel prices.
Federal development spending stood at Rs918 billion, Rs82 billion less than the originally approved budget but Rs100 billion more than the downward revised budget.
The Ministry of Finance also said that due to tight fiscal discipline, cash management and early retirement of Rs1.9 trillion in domestic debts, the government saved Rs1.967 trillion in servicing domestic debt. Against the budgeted Rs8.2 trillion, debt servicing remained at Rs6.95 trillion in the last fiscal year.
Source: Express Tribune
