Pakistan’s Fiscal Deficit Narrows to 1.6% of GDP as Petroleum Levy Collection Crosses Rs1.47 Trillion

ISLAMABAD: Pakistan’s overall fiscal deficit narrowed significantly during the first 11 months of fiscal year 2025-26, as record collections under the petroleum levy and climate support levy strengthened government revenues.

According to official data, the federal government collected more than Rs1.478 trillion through petroleum and climate levies, helping reduce the federal budget deficit to Rs3.34 trillion, equivalent to 2.6 percent of Gross Domestic Product (GDP) during the July-May period.

After accounting for a provincial budget surplus of Rs1.31 trillion, achieved in line with commitments made under the International Monetary Fund (IMF) programme, Pakistan’s overall fiscal deficit declined further to Rs2.03 trillion, or 1.6 percent of GDP.

Government Nears Annual Fiscal Target

The government had targeted an overall fiscal deficit of 3 percent of GDP for the entire FY2025-26, compared with the initial estimate of 3.9 percent.

The Ministry of Finance has yet to release the final reconciled fiscal accounts for the complete financial year ending June 30, 2026. Officials expect the final figures to be published in the coming weeks.

Non-Tax Revenue Strengthens Government Finances

Strong non-tax revenues played a key role in improving Pakistan’s fiscal outlook.

During the first 11 months of FY2025-26, the government generated Rs4.82 trillion in non-tax revenue against the annual target of Rs5.14 trillion.

The major contributors included:

State Bank of Pakistan (SBP) profit: Rs2.428 trillion
Petroleum levy: Rs1.432 trillion
Climate support levy: Rs45.97 billion

These revenue streams significantly boosted government finances amid ongoing economic reforms.

FBR Revenue Crosses Rs11.2 Trillion

The Federal Board of Revenue (FBR) collected Rs11.228 trillion during the July-May period.

Combined with non-tax revenues, the federal government’s gross revenue receipts reached Rs16.08 trillion.

After transferring Rs6.6 trillion to provinces under the National Finance Commission (NFC) Award and other mandatory transfers, the net federal revenue stood at Rs9.38 trillion.

Debt Servicing Remains Largest Expense

Government expenditure during the first 11 months reached Rs12.73 trillion, with current expenditures accounting for Rs12.15 trillion.

The largest expenditure remained interest payments on domestic and foreign debt, totaling Rs6.163 trillion, representing more than half of all current government spending.

Other major expenditure categories included:

Defence spending: Rs2.11 trillion
Salaries, pensions, subsidies, and civil administration: Rs3.879 trillion

Development Spending Continues

Under the Public Sector Development Programme (PSDP), the government spent Rs578 billion during the July-May period.

Planning Minister Ahsan Iqbal stated that the Planning Ministry successfully utilized 100 percent of its allocated PSDP funds for the second consecutive fiscal year, reflecting continued investment in infrastructure and development projects.

Final Fiscal Figures Expected Soon

The Ministry of Finance is expected to release the reconciled fiscal accounts for FY2025-26 in the coming weeks.

Officials remain optimistic that Pakistan will achieve its annual fiscal deficit target of 3 percent of GDP, supported by improved revenue collection, fiscal discipline, and provincial budget surpluses.

The data also showed a statistical discrepancy of Rs262.39 billion, reflecting differences between recorded revenues and expenditures that will be reconciled in the final fiscal accounts.