Pakistan Posts Third Straight Q1 Budget Surplus
Pakistan recorded a budget surplus of Rs1.274 trillion in the first quarter of the 2026-27 financial year, the third year in a row that the July to September quarter has ended in surplus.
The surplus, equal to 0.9 per cent of GDP, is smaller than last year’s, but the government presents the three-year run as a break with a long history of deficits. The Finance Ministry released the data on Friday, November 13.
Budget surplus falls 40 per cent as spending rises
The headline figure is down sharply on last year. The first-quarter surplus stood at Rs2.119 trillion, or 1.7 per cent of GDP, in the same period last year, so this year’s Rs1.274 trillion is a fall of Rs845 billion, or about 40 per cent.
The primary surplus, which excludes interest payments on government debt, also fell 15 per cent to Rs2.974 trillion, or 2.1 per cent of GDP, from Rs3.497 trillion a year earlier. Even so, it beat the budget target for the quarter by Rs239 billion, or 8.7 per cent.
The gap opened because revenue fell while spending rose. Total revenue declined 3 per cent to Rs6.004 trillion, from Rs6.2 trillion a year earlier, while total expenditure increased 16 per cent to Rs4.73 trillion, from Rs4.08 trillion.
Tax revenue rose 7 per cent to Rs3.387 trillion, with Federal Board of Revenue collections up to Rs3.086 trillion from Rs2.884 trillion. But non-tax revenue fell 14 per cent to Rs2.617 trillion, from Rs3.046 trillion, and that fall wiped out the gain from higher taxes.
Debt servicing eats more than half the primary surplus
Higher debt servicing, defence spending and development outlays drove the increase in expenditure, even though subsidies and grants were cut.
Markup payments on government debt rose 23 per cent to Rs1.7 trillion, from Rs1.378 trillion. Interest payments alone consumed around 57 per cent of the Rs2.974 trillion primary surplus in the quarter.
Defence spending rose 11 per cent to Rs495 billion, development spending jumped 59 per cent to Rs468 billion, and pensions rose 6 per cent to Rs264 billion.
Subsidies and grants fell 17 per cent to Rs366 billion, from Rs439 billion, while petroleum development levy and carbon levy collections rose 6 per cent to Rs404 billion, from Rs382 billion.
Three years of surpluses after 23 years of deficits
Finance Minister’s adviser Khurram Shehzad said Pakistan had now recorded three consecutive first-quarter surpluses, in FY25, FY26 and FY27, after 23 consecutive years of first-quarter deficits between FY02 and FY24.
The figures show first-quarter fiscal surpluses of Rs1.896 trillion in FY25, Rs2.119 trillion in FY26 and Rs1.274 trillion in FY27, with primary surpluses above Rs2.9 trillion in each year, the three highest in the 26-year data series.
The Finance Ministry said discipline had been maintained despite tax relief in the budget, and called the surpluses evidence of fiscal reform.
The quarterly result fits the wider FY26 picture, when the fiscal deficit fell to 2.6 per cent of GDP, its lowest in 22 years. That year the primary surplus reached 2.9 per cent of GDP, the highest since at least FY01, while interest spending fell 22 per cent.
Pakistan has now recorded primary surpluses in three straight financial years, from FY24 to FY26, and the government is also pressing its case for a double-B credit rating.
Analysts note that the first-quarter figure is flattered by seasonal State Bank profit transfers, and the 2.1 per cent primary surplus sits just above the International Monetary Fund’s full-year FY27 target of 2 per cent. The surplus, combined with net external financing of Rs609 billion and non-bank financing of Rs592 billion, allowed the government to retire Rs2.5 trillion in bank borrowing during the quarter.
Frequently asked questions
What was Pakistan’s fiscal surplus in Q1 FY27?
Rs1.274 trillion, or 0.9 per cent of GDP, in July-September 2026.
Why did the surplus fall from last year?
Revenue fell 3 per cent to Rs6.004 trillion while spending rose 16 per cent to Rs4.73 trillion, driven mainly by a 23 per cent rise in debt servicing to Rs1.7 trillion.
What is the primary surplus?
The balance before interest payments on government debt. It stood at Rs2.974 trillion, or 2.1 per cent of GDP, beating the budget target by Rs239 billion.
How long is the surplus streak?
Three consecutive first-quarter surpluses, in FY25, FY26 and FY27, after 23 straight years of first-quarter deficits from FY02 to FY24.
What did the government say?
The Finance Ministry said discipline held despite tax relief in the budget, and called the surpluses evidence of fiscal reform.
