Pakistan Turns Budget Deficit Into Rs. 2.1 Trillion Surplus

Pakistan reported a budget surplus of Rs. 2.1 trillion during the first quarter of the current fiscal year (FY26), equal to about 1.6 percent of the country’s total economic output (GDP). The improvement was largely due to a major profit payment from the State Bank of Pakistan (SBP). This marks a significant turnaround from the budget deficit seen in the final quarter of the previous fiscal year, according to data from the SBP compiled by Topline Research. The primary balance, which excludes interest payments, also remained positive, showing a surplus of 2.7 percent of GDP. Topline analysts said the central bank’s profit payment of around Rs. 2.42 trillion played the biggest role in strengthening the government’s finances. The SBP’s profits grew following a year of large-scale market operations that boosted its earnings. However, if this one-time profit payment is excluded, the government’s financial position appears tighter. Without the SBP’s contribution, the adjusted figures show a small deficit of 0.2 percent of GDP and a primary surplus of 0.8 percent, indicating that underlying fiscal pressures still exist despite the overall improvement. The government used part of the surplus to pay off around Rs. 2 trillion in domestic debt and Rs. 38 billion in external loans during the quarter. Interest payments reached Rs. 1.4 trillion, equal to 48 percent of the Federal Board of Revenue’s tax collection, slightly better than the 51 percent recorded in the same period last year. Development spending under the Public Sector Development Program (PSDP) rose 7 percent year-on-year to Rs. 295 billion, while defense spending grew by 9 percent. Transfers to provincial governments made up 56.3 percent of total tax revenue, roughly the same as last year. Economists expect the full-year budget deficit to reach about 4.6 percent of GDP, higher than the government’s target of 3.9 percent, due to rising spending needs and possible shortfalls in revenue caused by flood recovery efforts and slower economic growth.