Pakistan Posts Surprise Fiscal Surplus in 1HFY26
Pakistan recorded an unexpected fiscal surplus of Rs. 542 billion, equivalent to 0.4% of GDP, in the first half of fiscal year 2026 (1HFY26), reversing a deficit of Rs. 1.5 trillion (1.3% of GDP) in the same period last year, research from Topline Securities shows.
The primary surplus widened to Rs. 4.1 trillion, or 3.2% of GDP, comfortably exceeding the IMF’s FY26 target of 2.6% of GDP. Topline attributed the fiscal turnaround to a 10% decline in total expenditures alongside revenue growth of around 9%.
Interest expenses, a major component of government spending, fell sharply. Local debt servicing costs dropped 33%, contributing to an overall 31% year-on-year reduction in markup payments.
However, external debt payments rose slightly by 1.6%. Interest costs in the second quarter were Rs. 2.2 trillion, down 43% year-on-year, though a quarter-on-quarter rise of 59% reflected seasonal and maturity effects in December and June.
Despite the overall spending cuts, subsidy and grant outlays jumped 42% year-on-year and 91% quarter-on-quarter to Rs. 838 billion, largely driven by flood relief and rescue operations, Topline noted.
Capitalizing on the surplus, the government retired Rs. 575 billion of domestic debt during 1HFY26 while taking on only Rs. 34 billion in external borrowing. Analysts said this debt retirement could ease near-term financing pressures and reduce rollover risks in local markets.
Revenue collections also strengthened, with total half-year revenue reaching roughly Rs. 10.7 trillion, supported by robust tax receipts. Topline cautioned, however, that seasonal pressures and one-off relief spending could pose challenges to sustaining fiscal gains for the full year.
Reference Link:- https://propakistani.pk/2026/02/09/pakistan-posts-surprise-fiscal-surplus-in-1hfy26/
Zamir Ahmed Awan is the founder and Chair of the Global Silk Route Research Alliance, a think tank in Islamabad. He studied engineering at Shanghai University in the 1980s, and years later he went back to China as Pakistan's science counsellor in Beijing, from 2010 until 2016, working on science and higher education cooperation between the two countries.…
