Pakistan’s overall fiscal deficit stood at 1.6% of Gross Domestic Product (GDP) during the first 11 months (July–May) of fiscal year 2025-26, according to official data released by the Ministry of Finance.
The deficit amounted to Rs2.03 trillion, remaining well below the government’s full-year target of 3% of GDP, or approximately Rs3.77 trillion.
At the federal level, the budget deficit reached Rs3.34 trillion, equivalent to 2.6% of GDP, before accounting for the provincial surplus.
Petroleum and climate levies boost revenue
The government’s fiscal position was supported by strong collections from non-tax revenue, particularly the petroleum levy and the climate support levy.
During the first 11 months of FY26:
- Petroleum levy: Rs1.432 trillion
- Climate support levy: Rs45.97 billion
- State Bank of Pakistan (SBP) profit: Rs2.428 trillion
Together, these three major sources generated approximately Rs4.82 trillion in non-tax revenue, compared with the full-year target of Rs5.14 trillion.
Provincial surplus supports fiscal balance
Another key factor behind the lower fiscal deficit was a provincial revenue surplus of Rs1.31 trillion, achieved in line with Pakistan’s commitments under its agreement with the International Monetary Fund (IMF).
The surplus helped reduce the consolidated fiscal deficit from the federal level of 2.6% of GDP to an overall 1.6% of GDP during the July–May period.
The Ministry of Finance has yet to publish the reconciled fiscal accounts for the full financial year, which ended on June 30, 2026.
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Debt servicing remains the biggest expense
Government expenditure during the first 11 months of FY26 totalled Rs12.73 trillion, of which Rs12.15 trillion was spent on current expenditures.
The largest single expense remained interest payments on domestic and foreign debt, which reached Rs6.163 trillion—more than half of total current expenditure.
Other major spending included:
- Defence: Rs2.11 trillion
- Salaries, pensions, subsidies and civil administration: Rs3.879 trillion
The figures highlight the significant burden debt servicing continues to place on Pakistan’s public finances.
Development spending and tax collection
The Federal Board of Revenue (FBR) collected Rs11.228 trillion in taxes during the July–May period.
After transfers of Rs6.6 trillion to the provinces under the National Finance Commission (NFC) Award, the federal government’s net revenue stood at Rs9.38 trillion.
Meanwhile, spending under the Public Sector Development Programme (PSDP) reached Rs578 billion during the first 11 months of the fiscal year.
Planning Minister Ahsan Iqbal said the government successfully utilised 100% of the PSDP allocation for the second consecutive year.
The Ministry of Finance is expected to release the final reconciled fiscal data in the coming weeks to confirm whether the government achieved its full-year fiscal deficit target of 3% of GDP.
