Pakistan’s fiscal surplus fell by 40% in the first quarter of the 2026-27 fiscal year, to Rs1.273 trillion from Rs2.12 trillion a year earlier, according to Ministry of Finance fiscal operations data reported by Dawn. Total revenue fell in absolute terms, which is rare, while interest payments rose by more than 23%. For business, the numbers matter because they shape how hard the government will push on taxes, energy levies and spending cuts for the rest of the year under its IMF programme.
The short version
- The overall fiscal surplus fell to Rs1.273tr (0.9% of GDP) in July-September, from Rs2.12tr (1.7% of GDP) a year earlier.
- Total revenue slipped to Rs6.004tr from Rs6.2tr, mainly because SBP profit fell to Rs1.933tr from Rs2.43tr.
- Tax revenue rose to Rs3.387tr, but interest payments jumped to Rs1.7tr from Rs1.378tr.
- Provincial cash surpluses fell 23% to Rs600bn, with Balochistan in deficit.
What happened
The fiscal surplus in Pakistan for July-September FY27 came in at Rs1.273tr, down 40% year on year. The primary surplus, which excludes interest payments, fell 15% to Rs2.97tr (2.1% of GDP) from Rs3.5tr (2.8% of GDP). Total revenue was Rs6.004tr, against Rs6.2tr in the same quarter last year.
Tax revenue actually grew, to Rs3.387tr from Rs3.153tr. The fall came from non-tax revenue, which dropped to Rs2.6tr from Rs3.046tr. The biggest single factor was the profit transferred by the State Bank of Pakistan, which fell to Rs1.933tr from Rs2.43tr. Petroleum receipts edged up to Rs382bn from Rs372bn.
On the spending side, total expenditure rose 16% to Rs4.73tr. Interest payments rose to Rs1.7tr from Rs1.378tr, defence spending to Rs496bn from Rs447bn, and development spending to Rs468bn from Rs440bn. Subsidies fell to Rs84.6bn from Rs120bn, and pensions rose 10% to Rs495bn.
Less SBP profit, more interest: the surplus shrank by 40%
Federal fiscal data, July-September, Rs trillion, FY26 vs FY27
Why it matters
Last year’s large surplus leaned heavily on a very large SBP profit. That cushion is now thinner, while the cost of servicing debt keeps rising. A smaller fiscal surplus in Pakistan leaves less room for relief measures and makes the government more dependent on tax collection and levies to meet its IMF targets. Separately, SBP data reported by Dawn show domestic debt fell to Rs57.757tr at the end of September from Rs59.393tr in June, as the government retired some bank debt. Those numbers sit alongside a long-running debate on how the Centre and provinces share costs, covered in our story on federal spending on devolved subjects.
The knock-on effects
First order: less fiscal room for relief
With revenue below last year and interest costs higher, the finance ministry has less space for tax relief or new subsidies. Subsidies already fell to Rs84.6bn in the quarter.
Second order: pressure on tax collection and levies
Tax revenue rose, but its share of GDP slipped to 2.4% from 2.5%. If the gap persists, businesses could face tighter enforcement and documentation drives. Recent examples include the push on real estate tax collection, which fell after rates were halved.
Third order: interest rates and debt markets
At Rs1.7tr for the quarter, interest cost more than three times as much as defence or development spending. The path of SBP policy rates will drive this bill, and also the returns that have drawn foreign investment into Pakistan bonds.
Who could benefit
- Bond investors: high interest payments reflect yields that remain attractive to holders of government paper.
- Khyber Pakhtunkhwa: its cash surplus rose 33% to Rs102bn, the only province to improve.
- Development contractors: federal development spending rose to Rs468bn from Rs440bn.
Who may face pressure
- Taxpayers and documented businesses: a revenue shortfall usually brings more enforcement on the existing tax base.
- Subsidy-dependent sectors: subsidies fell to Rs84.6bn from Rs120bn.
- Provinces with weaker finances: Punjab’s surplus fell to Rs333bn from Rs442bn, and Balochistan posted a Rs16bn deficit after a Rs53bn surplus.
What to watch
- Monthly FBR collection figures for November, due in early December.
- The next SBP monetary policy decision, which drives the interest bill.
- IMF programme reviews and any new revenue measures linked to them.
- Provincial surplus figures for October-December, especially Punjab and Balochistan.
Sources
- Dawn, Fiscal surplus shrinks 40pc as revenues decline, 14 Nov 2026
- Dawn, Domestic debt falls to Rs57.7tr in July-Sept, 14 Nov 2026
This is analysis, not investment advice. Figures are as of 14 Nov 2026.
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