By Abdul Ghani
Pakistan reached an important milestone in managing its finances during FY2025, recording the lowest fiscal deficit in eight years and the highest primary surplus in 24 years.
The Finance Division highlighted these achievements in its Monthly Economic Update & Outlook – September 2025, noting that the government’s focus on better budget management and public finance discipline is paying off.
According to the report, higher revenue collection and careful spending created room for increased development projects in FY2025. This strong fiscal base continued into the first two months of FY2026, keeping the economy on a stable path.
Revenue Growth
In July FY2026, net federal revenues rose by 7.7 percent to Rs.440 billion. Non-tax revenue grew by 23.9 percent, while tax revenue increased by 14.8 percent. The boost in non-tax revenue came mainly from petroleum levies, dividends from public enterprises, and defense-related income.
The Federal Board of Revenue (FBR) also reported progress. Net tax collection climbed 14.1 percent to Rs.1,661.5 billion during July–August FY2026, up from Rs.1,456.1 billion in the same period last year. In August alone, tax collections reached Rs.904 billion, compared to Rs.796 billion in August 2024.
Expenditure and Deficit
Government spending in July FY2026 rose by 28.8 percent to Rs.990.1 billion, compared to Rs.768.9 billion last year. Despite the higher spending, the fiscal deficit remained low at just 0.2 percent of GDP.
The primary surplus, which excludes interest payments, improved to Rs.228.9 billion (0.2% of GDP) in July FY2026, compared to Rs.107.1 billion (0.1% of GDP) last year.
The Finance Division emphasized that the government plans to build on these gains in FY2026 through continued revenue mobilization and careful spending.
Economists believe this progress will allow Pakistan to fund infrastructure and social programs without risking fiscal stability.
However, challenges remain. Higher interest payments on public debt and unexpected costs from climate disasters, like the July floods, could affect the fiscal balance.
Reliance on non-tax revenues, particularly petroleum levies, also raises concerns if global energy prices fluctuate.
Still, the Finance Division noted that the fiscal consolidation achieved in FY2025, carried into FY2026, has strengthened Pakistan’s financial foundation, paving the way for more stable growth and sustainable development in the coming years.
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