Pakistan’s federal government reported an unexpected fiscal surplus of Rs1.5 trillion during the first quarter of the current fiscal year, marking a rare occurrence in the country’s financial history. The Ministry of Finance (MoF) announced the achievement in its Monthly Economic Update & Outlook for October 2025, noting that the surplus was attained despite significant challenges such as flood-related supply disruptions and temporary border closures with Afghanistan.
According to the report, the surplus contrasts sharply with a fiscal deficit of Rs648.8 billion recorded during the same period last year. The improvement reflects a strong rise in revenues, controlled expenditures, and consistent adherence to fiscal discipline under the government’s ongoing reform program.
The MoF acknowledged that while inflation has edged up due to climate and trade disruptions, the overall trend remains within manageable limits. “Flood-related supply disruptions and temporary border closures have put upward pressure on prices of a few essential commodities,” the report stated. Despite these pressures, the ministry projected inflation to remain in the 5–6% range during October 2025, after recording 5.6% in September.
Net federal revenues grew sharply by 231.4% to Rs3.27 trillion in July–August FY2026, compared to Rs986.7 billion in the corresponding period last year. This jump was largely driven by a remarkable 721% increase in non-tax revenues and a 14% improvement in Federal Board of Revenue (FBR) tax collections.
The report attributed the surge in non-tax revenues to higher profits from the State Bank of Pakistan, alongside increased receipts from petroleum levies, dividends, defense earnings, and windfall levies on crude oil. FBR’s tax collection during July–September FY2026 rose to Rs2.88 trillion, up 12.5% year-on-year, indicating stronger compliance and improved collection efficiency.
On the expenditure side, the government managed to limit spending growth to just 7.6%, with total outlays reaching Rs1.76 trillion. As a result, the fiscal balance recorded a surplus of Rs1.509 trillion, while the primary balance posted an even stronger surplus of Rs2.939 trillion, a massive improvement from Rs49.4 billion in the same period last year.
Despite the positive fiscal trend, the MoF cautioned that climate-induced challenges have weighed on the agricultural sector. The recent floods caused an estimated Rs430 billion in losses, damaging key crops such as rice, cotton, sugarcane, maize, and vegetables. However, early recovery signs have emerged, supported by increased agricultural credit, machinery imports, and improved fertilizer distribution.
The ministry also highlighted improving global economic indicators that bode well for Pakistan’s export sector. “The Composite Leading Indicators of the US, UK, China, and the Euro Area have strengthened, suggesting better export prospects for Pakistan in the months ahead,” the report noted.
Pakistan’s economy has continued to recover steadily, buoyed by the rebound in Large-Scale Manufacturing (LSM), particularly in sectors like cement, automobiles, and electrical equipment. Exports and remittances have remained stable, while the external sector recorded a current account surplus in September, signaling strengthened external stability.
The Finance Ministry credited the successful IMF review under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) for boosting investor confidence and reaffirming Pakistan’s commitment to fiscal consolidation. The report also emphasized the government’s focus on privatisation, digital governance, and joint ventures under CPEC Phase 2.0 as critical components of its growth strategy.
“The government remains firmly committed to maintaining fiscal discipline, ensuring social protection, and pursuing sustainable, inclusive growth within a sound macroeconomic framework,” the MoF concluded.
Analysts view the Rs1.5 trillion fiscal surplus as a significant milestone for Pakistan’s economic management, though they caution that sustaining the trend will require continued prudence amid global uncertainties and domestic structural challenges.
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