Pakistan’s fiscal performance has shown continued improvement, reflecting the government’s focus on maintaining discipline in both revenues and expenditures. In FY2025, the fiscal deficit dropped to an eight-year low, while the primary balance recorded a surplus at a 24-year high, signaling renewed stability in public finances. These gains, driven by prudent policies, have created space for higher development spending while setting a stronger foundation for fiscal management in FY2026.
The government has emphasized its commitment to sustaining this momentum by strengthening revenue mobilization and implementing tighter expenditure management strategies. Officials believe these measures will help reinforce the credibility of fiscal accounts and ensure that macroeconomic stability continues through the new fiscal year.
During July FY2026, the fiscal performance remained aligned with expectations. Net federal revenues increased by 7.7 percent, reaching Rs. 440 billion. This growth was supported by a strong 23.9 percent rise in non-tax revenues and a 14.8 percent increase in tax revenues. A substantial share of non-tax revenues came from higher collections through the petroleum levy, dividends, and defense-related receipts, demonstrating the government’s ability to diversify revenue streams beyond traditional tax channels.
The Federal Board of Revenue (FBR) also contributed positively, with net tax collection expanding by 14.1 percent year-on-year to Rs. 1,661.5 billion during the July–August period of FY2026. Analysts suggest that this momentum, if sustained, could allow the government to not only meet but potentially exceed its fiscal targets for the year.
On the expenditure side, government spending in July FY2026 increased by 28.8 percent to Rs. 990.1 billion. This rise reflects higher outlays in key sectors, including defense, subsidies, and development programs. Despite the growth in expenditure, the government was able to contain the fiscal deficit at just 0.2 percent of GDP, indicating that revenues grew sufficiently to balance a greater share of the spending.
The primary surplus—a measure of the government’s fiscal position excluding interest payments—improved to Rs. 228.9 billion, equivalent to 0.2 percent of GDP. This compares favorably with Rs. 107.1 billion, or 0.1 percent of GDP, recorded in the same period last year. Achieving this surplus is viewed as an important milestone, given Pakistan’s history of persistent fiscal imbalances and the significant burden of debt servicing.
Economists argue that maintaining fiscal discipline will be critical for sustaining economic stability, especially in a year where global uncertainties, energy prices, and domestic pressures could strain the government’s finances. The improvement in fiscal health also strengthens Pakistan’s position in ongoing discussions with multilateral institutions and investors, who closely monitor fiscal indicators when assessing the country’s economic outlook.
Looking ahead, the government plans to consolidate these gains by continuing reforms in revenue collection, particularly expanding the tax base, while exercising caution in expenditures. The commitment to channel more resources toward development projects suggests that while discipline is being enforced, growth-supportive spending will not be compromised.
Pakistan’s fiscal performance in FY2025 and early FY2026 highlights a rare but welcome period of stability in the country’s economic management. The sustained primary surplus, effective expenditure control, and rising revenues collectively point to a more resilient fiscal trajectory, giving policymakers greater room to maneuver in addressing broader economic challenges.
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