By Staff Reporter
ISLAMABAD: Pakistan ran a budget surplus for a third consecutive July-September quarter, building on a turnaround from 23 years of first-quarter deficits, though the cushion was about 40% smaller than a year earlier after central bank profit transfers fell and interest costs rose.
The consolidated surplus was 1.274 trillion rupees, or 0.9% of gross domestic product, against 2.119 trillion rupees, or 1.7% of GDP, in the same period last year. That is about $4.55 billion at current exchange rates, down from roughly $7.57 billion a year earlier. Khurram Schehzad, an adviser to the finance minister, announced the figures in a post on X on Friday.
The primary surplus, which excludes interest payments, reached 2.974 trillion rupees, or 2.1% of GDP. That was 239 billion rupees, or 8.7%, above the budget target for the quarter. It was still lower than the 3.497 trillion rupees, or 2.7% of GDP, recorded a year earlier.
Schehzad said Pakistan posted first-quarter deficits in every fiscal year from 2002 through 2024. It then recorded surpluses of 1.896 trillion rupees in fiscal 2025 and 2.119 trillion rupees in fiscal 2026. He said the past three years also produced the three highest first-quarter primary surpluses in 26 years, each above 2.9 trillion rupees. In his telling, the record reflects “sustained fiscal discipline and stability” rather than a temporary improvement. He added that tax collections beat their target in the quarter despite relief measures in the fiscal 2027 budget, and that spending was held in check.
The detailed accounts point to a more mixed picture. Non-tax revenue fell 14% to 2.617 trillion rupees, mostly because profit transfers from the State Bank of Pakistan dropped 20% to 1.933 trillion rupees from 2.428 trillion rupees. Tax revenue rose 7% to 3.387 trillion rupees, and collections by the Federal Board of Revenue also gained 7%, to 3.086 trillion rupees. That growth did not fully offset the lost central bank income.
Total government spending rose 16% to 4.73 trillion rupees from 4.08 trillion rupees. Interest payments climbed 23% to 1.7 trillion rupees, absorbing about 57% of the primary surplus. Defense outlays rose 11% to 495 billion rupees and pension spending gained 6% to 264 billion rupees. Subsidies and grants fell 17% to 366 billion rupees.
Development spending under the Public Sector Development Programme jumped 59% to 468 billion rupees. Provincial governments accounted for about 392 billion rupees of that, against 75 billion rupees at the federal level. The federal government’s surplus was 674 billion rupees, while the four provinces together saved about 600 billion rupees.
The first-quarter result follows a strong fiscal 2026. The Finance Division has said the overall deficit narrowed to 2.6% of GDP from 5.4% a year earlier, and Schehzad said that was the lowest in 22 years. The primary surplus reached 2.9% of GDP, the highest since at least fiscal 2001, and interest expenses fell 22%. It was the third straight annual primary surplus, covering fiscal 2024 through 2026.
The full-year test is still ahead. Pakistan has committed to the International Monetary Fund to a primary surplus of 2% of GDP in fiscal 2027. The IMF and Pakistani authorities reached a staff-level agreement on Oct. 7 that could release another $1.21 billion under the fourth review of a 37-month Extended Fund Facility and the third review of a 28-month Resilience and Sustainability Facility. The deal still needs approval from the Fund’s Executive Board, and the lender has said risks remain high from geopolitical tensions, energy prices, global financial conditions and trade disruption.
Fitch Ratings is less optimistic than the government. It projects an overall deficit of 4.0% of GDP and a primary surplus of 1.9% for fiscal 2027, compared with official targets of 3.6% and 2.0%. The agency has said that hitting the primary surplus target depends on revenue outperforming historical trends, which it considers challenging given weaknesses in tax administration and a thin pipeline of new tax measures.
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