Pakistan recorded its lowest fiscal deficit in at least 27 years during the first nine months of the current fiscal year, driven by strong provincial surpluses, higher petroleum levy collections, and lower interest payments.
According to data released by the Ministry of Finance, the fiscal deficit during July–March stood at Rs. 856 billion compared to Rs. 2.97 trillion in the same period last year, marking an improvement of 71 percent.
The fiscal year initially began with a Rs. 2.1 trillion surplus, which narrowed to Rs. 542 billion by the middle of the year before turning into a deficit by the end of the third quarter.
Provincial governments played a major role in improving the fiscal position by generating a combined cash surplus of Rs. 1.636 trillion during the first nine months, exceeding the annual target of Rs. 1.464 trillion.
Punjab recorded the highest surplus at Rs. 824 billion, followed by Sindh with Rs. 441 billion, Khyber Pakhtunkhwa with Rs. 253 billion, and Balochistan with Rs. 118 billion.
The petroleum development levy emerged as the federal government’s largest revenue source, increasing 45 percent to Rs. 1.205 trillion compared to less than Rs. 835 billion during the same period last year.
Meanwhile, profits transferred by the State Bank of Pakistan also remained strong.
Interest payments declined significantly by nearly Rs. 1.5 trillion to Rs. 4.948 trillion, compared to Rs. 6.44 trillion a year earlier. Pakistan’s primary surplus reached Rs. 4.1 trillion, equivalent to 3.2 percent of GDP.
Despite the improvement, the overall revenue-to-GDP ratio declined slightly to 11.4 percent from 11.7 percent last year.
Tax revenues fell to 7.8 percent of GDP, while non-tax revenues slipped to 3.6 percent. Direct taxes remained stable at 3.6 percent of GDP, while sales tax and customs duty collections recorded declines.
Overall government expenditure dropped to 12.1 percent of GDP from 14.2 percent, mainly due to reduced debt servicing costs.
However, defence expenditure increased to Rs. 1.69 trillion from Rs. 1.423 trillion last year, while subsidies rose to Rs. 632 billion from Rs. 466 billion.
The Federal Board of Revenue reported tax collections of Rs. 9.306 trillion during July–March, while provincial tax revenues increased 26 percent to Rs. 861 billion.
