Pakistan's fiscal surplus plunges 40% in Q1 as spending and interest costs rise

Islamabad: Pakistan's fiscal position came under renewed pressure in the first quarter of the current financial year, with the country's overall budget surplus falling sharply amid declining government revenues, rising expenditure and higher interest payments.

According to a report published by Dawn, Pakistan's overall fiscal surplus dropped to 0.9 per cent of Gross Domestic Product (GDP) during July-September 2026, compared to 1.7 per cent in the corresponding period last year.

In absolute terms, the surplus declined by 40 per cent to 1.273 trillion Pakistrupees from 2.12 trillion rupees a year earlier. Dawn reported that the primary surplus, which excludes interest payments, also fell to 2.1 per cent of GDP from 2.8 per cent, indicating growing pressure on government finances.


As reported by Dawn, the Ministry of Finance data showed that total government revenue declined to 6.004 trillion rupees from 6.2 trillion rupees, despite an increase in tax collections.

Tax revenue rose to 3.387 trillion rupees from 3.153 trillion rupees, while non-tax revenue dropped significantly, mainly due to lower profits transferred by the State Bank of Pakistan.

On the expenditure side, government spending increased by 16 per cent to 4.73 trillion rupees. According to Dawn, interest payments emerged as a major source of pressure, rising by more than 23 per cent to 1.7 trillion rupees during the quarter.

Defence spending, pensions and administrative expenses also contributed to government expenditure, while subsidies were reduced.

The latest figures highlighted Pakistan's continuing economic difficulties, as the country struggles with high public debt, expensive debt servicing, limited revenue generation and dependence on financial assistance and economic reforms.

Despite efforts to control spending and improve tax collection under its International Monetary Fund (IMF) programme, pressure on public finances remains significant.

Pakistan's latest fiscal figures expose the fragility of its economic recovery, with falling revenues, rising debt-servicing costs and shrinking provincial surpluses highlighting persistent structural weaknesses.