By Staff Reporter
The government posted a rare Rs1.51 trillion federal fiscal surplus in the first quarter of fiscal year 2026, flipping last year’s Rs649 billion deficit and signalling robust revenue gains even as floods hammered crops and spiked food prices.
Net federal revenues surged 231% to Rs3.27 trillion in July-August from Rs987 billion a year earlier, the Ministry of Finance said in its Monthly Economic Update & Outlook for October 2025, released on Monday. A 721% jump in non-tax revenue, fueled by State Bank of Pakistan profits, dividends, defence receipts, Windfall Levy on crude oil, Gas Infrastructure Development Cess and petroleum levy, drove the windfall.
Federal Board of Revenue tax collections climbed 14% in the two months and 12.5% to Rs2.88 trillion through September. Spending rose a tame 7.6% to Rs1.76 trillion, yielding the headline surplus and a primary balance surplus of Rs2.94 trillion, up from just Rs49 billion last year. “Consequently, the federal fiscal balance recorded a surplus of Rs1.509tr, compared to a deficit of Rs648.8bn last year,” the ministry said.
Inflation ticks up to 5.6% in September from 3% in August, missing the ministry’s 3.5%-4.5% forecast from Sept. 30. “Flood-related supply disruptions and temporary border closures have put upward pressure on prices of a few essential commodities,” the report said. Still, consumer prices should hold in the 5%-6% target for October.
Agriculture took a Rs430 billion hit from floods damaging rice, cotton, sugarcane, maize, fodder and vegetables. “Nevertheless, recent indicators suggest that recovery efforts are underway, supported by increased agricultural credit, higher machinery imports, and improved fertiliser off-take,” it added.
Large-scale manufacturing expanded 4.4% in July-August, with gains in wearing apparel, non-metallic minerals, food, electrical equipment, automobiles and tobacco. August posted a slim 0.5% year-on-year rise. Exports brighten on stronger demand signals from key markets. “The Composite Leading Indicator position of the US, UK, China and the euro area has further strengthened compared to the last month, with all moving above or near their long-term potential levels, signalling improved export prospects for Pakistan,” the ministry said.
Goods exports rose 6.5% to $7.9 billion in the quarter, outpacing 8.3% import growth to $15.4 billion and widening the trade gap to $7.5 billion from $6.8 billion. Remittances jumped 8.4% to $9.5 billion, led by Saudi Arabia (24%) and UAE (21%); September inflows climbed 11.3% year-on-year. The current account swung to a $110 million surplus in September after a $594 million quarterly deficit.
Foreign direct investment plunged 55.5% to $185.6 million in September from $417.4 million a year earlier, with cumulative net inflows down 64.5% to -$361.1 million from $446.9 million. Quarter totals hit $568.8 million, led by China ($189 million) and Hong Kong ($96 million) into power and financial services. Reserves stood at $19.9 billion as of Oct. 17, including $14.5 billion at the central bank. Money supply (M2) shrank 2.6% through early October.
The KSE-100 Index soared 16,875 points or 11% in September to 165,493, pushing market cap to Rs19.3 trillion. It traded at 166,553 on Oct. 22.IMF nods approval in its review of the Extended Fund Facility and Resilience and Sustainability Facility. “Continued progress in privatisation, digital governance, and CPEC Phase 2.0 joint ventures underscores the government’s commitment to fiscal consolidation, structural transformation, and sustainable, inclusive growth,” the report said.
Social safety nets disbursed Rs14.6 billion under Benazir Income Support Programme in July-August, down 60%. The Pakistan Poverty Alleviation Fund issued 5,370 interest-free loans worth Rs323 million last month; cumulative since 2019: Rs121 billion. Overseas worker registrations surged 43% to 73,545. “The government would remain firmly committed to maintaining fiscal discipline and providing targeted social protection within a sound and forward-looking macroeconomic policy framework,” the ministry affirmed, as “Pakistan’s economy maintained its recovery path despite flood-related disruptions.”
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