Pakistan’s fiscal position strengthened during the first half of FY2026, reflecting the government’s push to optimize revenue collection and streamline expenditure management. During July to December FY2026, total revenue increased by 9.4 percent, reaching Rs. 10,683.6 billion. The expansion was supported by growth in both tax and non-tax revenues, which rose by 10.9 percent and 7.0 percent respectively, signaling improved inflows across multiple revenue streams.
On the expenditure side, total spending declined by 10.3 percent to Rs. 10,141.7 billion during the same period. The contraction was largely attributed to a reduction in current expenditure, which fell by 5.2 percent. A significant factor behind this decline was a 30.7 percent drop in markup expenditure, easing pressure on the fiscal framework and contributing to improved budgetary outcomes.
In contrast to the compression in current spending, development expenditure recorded a sharp increase of 43.2 percent. This surge was primarily driven by higher provincial development spending, indicating a shift toward growth-oriented allocations and infrastructure-related outlays at the subnational level. The divergence between declining current expenditure and rising development expenditure highlights a rebalancing of fiscal priorities.
As a result of these revenue and expenditure dynamics, the overall fiscal balance posted a surplus of 0.4 percent of GDP, equivalent to Rs. 541.9 billion, during Jul-Dec FY2026. This marks a significant turnaround from the deficit of 1.3 percent of GDP, or Rs. 1,537.9 billion, recorded during the corresponding period last year. The shift from deficit to surplus underscores the impact of revenue expansion combined with expenditure restraint.
The primary balance also reflected improvement. A primary surplus of Rs. 4,105.5 billion, equivalent to 3.2 percent of GDP, was recorded in the first half of FY2026. This compares with a primary surplus of Rs. 3,603.7 billion, also 3.2 percent of GDP, during the same period last year. While the primary surplus as a share of GDP remained unchanged, the higher nominal surplus indicates stronger fiscal consolidation in absolute terms.
Revenue performance during Jul-Jan FY2026 was further reinforced by collections from the Federal Board of Revenue. The Federal Board of Revenue’s tax collection increased by 10.5 percent, reaching Rs. 7,176.9 billion. The growth was broad-based, supported by both direct and indirect taxes. Direct taxes rose by 11.1 percent, while indirect taxes increased by 9.8 percent, reflecting expansion across income-based and consumption-based tax heads.
Within indirect taxes, sales tax collections grew by 10.3 percent, customs duties increased by 5.4 percent, and federal excise duty recorded a notable rise of 15.2 percent. The performance across these categories points to improved compliance, higher transaction volumes, and relatively stable import and production activity contributing to tax generation.
Overall, the fiscal data for the first half of FY2026 indicates a measurable improvement in Pakistan’s budgetary position. Higher revenues, disciplined current expenditure, a sharp reduction in markup payments, and increased development spending collectively shaped a surplus outcome. With tax collections maintaining double-digit growth and provincial development allocations accelerating, the fiscal framework appears more balanced compared to the previous year’s deficit-driven profile.
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