By Farooq Awan
Pakistan’s economy has begun the new fiscal year on a surprising high. The country recorded a massive primary surplus of Rs2.9 trillion in the first quarter of FY2026 — a strong sign of improved financial discipline and better control over spending, according to this reporter.
This strong primary surplus in Pakistan shows a positive step toward long-term financial stability and effective fiscal management.
This gain, revealed in the Finance Division’s Monthly Economic Update & Outlook for October 2025, shows how rising government revenues and tight spending limits are helping Pakistan stay on track with its commitments to the IMF program.
Strong Revenue Growth Boosts Fiscal Health
Strong revenue performance has been the biggest contributor to this turnaround. The report said higher earnings from petroleum levies and profits transferred by the State Bank of Pakistan (SBP) played a major role.
The primary balance — which shows the difference between revenues and expenditures excluding interest payments — jumped to Rs2,938.9 billion in July–August FY2026 from just Rs49.4 billion during the same period last year.
Fiscal Balance Turns Positive After a Year of Deficit
The improvement is even more striking when looking at the overall fiscal balance. Pakistan posted a surplus of Rs1,509.2 billion, reversing last year’s deficit of Rs648.8 billion.
The Finance Division credited this success to strong tax performance, strict control over expenses, and better cash management.
FBR’s Collection and Non-Tax Revenues Show Strong Momentum
The Federal Board of Revenue (FBR) also made notable progress. Between July and September FY2026, it collected Rs2,884.4 billion — up 12.5 percent compared to last year.
Non-tax revenues also surged, mainly due to SBP profits, dividends, defense receipts, petroleum levies, and the Gas Infrastructure Development Cess.
According to the Finance Division, this performance highlights stronger governance, improved tax administration, and a clear focus on responsible financial management.
The government’s better handling of funds has also reduced its dependence on domestic borrowing, leaving more money available for private businesses.
Economists Predict Long-Term Fiscal Stability
Economists believe this surplus could help Pakistan reduce its debt-to-GDP ratio and build long-term financial stability.
“This marks a meaningful move toward lasting fiscal health and credibility,” said one expert quoted in the report.
However, the report warned that staying on this path won’t be easy. The government will need to keep a close eye on how it spends money, continue tax reforms, and carefully manage subsidies. It advised policymakers to avoid short-term populist spending and focus on projects that bring real economic value.
Outlook for FY2026 Remains Stable and Promising
The Finance Division further noted that stability in the external sector — including strong foreign reserves and a contained current account deficit — is helping create a healthier economic environment.
It also said that post-flood rebuilding costs are being handled within existing budgets, avoiding unplanned borrowing.
“The fiscal framework remains fully in line with IMF program goals,” the report stated.
Another encouraging sign is the coordination between the federal and provincial governments, which has helped maintain better balance in overall fiscal management.
Ongoing efforts to privatize state-owned enterprises and expand digital governance are also expected to create more financial room for development.
With these improvements in both fiscal and external sectors, Pakistan’s economic outlook for FY2026 appears more stable and optimistic.
The Finance Division expects that steady revenue growth, disciplined spending, and responsible financial policies will continue to support macroeconomic stability in the months ahead.
Author Profile
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Farooq Awan is a meticulous finance correspondent focused on Pakistan’s growth engines.
His reporting, driven by State Bank data, details the services sector's resilience and 3% expansion as the primary force behind GDP recovery. Awan highlights the critical role of ICT and stable policy in driving this essential economic digital transformation.
