The Pakistan fiscal performance during the first half of the current fiscal year presents a mixed picture of rising expenditures, steady revenues, and continued pressure from debt servicing and defense spending. According to figures released by the Ministry of Finance, government expenditures increased sharply in the second quarter, while the budget balance narrowed significantly compared to the first quarter.
During the second quarter, expenditures rose by Rs6,061 billion compared to the first quarter, highlighting the government’s growing spending requirements. As a result, the budget balance deteriorated from Rs2,119 billion between July and September to Rs541 billion in the following quarter. This sharp change reflects higher development needs, debt obligations, and operational costs, all of which are central to understanding Pakistan fiscal performance in the ongoing fiscal year.
Despite the pressure on the budget balance, the primary balance remained in surplus, offering a positive signal. From July to December, the primary surplus stood at Rs4,105 billion. A primary surplus indicates that government revenues were sufficient to cover expenditures excluding interest payments, which is often seen as a key indicator of fiscal discipline. Maintaining this surplus is crucial for improving Pakistan fiscal performance and reassuring lenders and investors.
On the revenue side, the government generated total revenues of Rs10,683 billion in the first six months. Tax revenue accounted for Rs6,729 billion, while non-tax revenue contributed Rs3,954 billion. Federal revenue stood at Rs6,160 billion, and provincial revenue reached Rs568 billion. These figures suggest a relatively balanced contribution between tax and non-tax sources, although sustained growth in tax collection remains essential for long-term fiscal stability.
Interest payments continued to consume a significant portion of government spending. According to the Ministry of Finance, Rs3,563 billion was spent on interest payments during the first six months of the fiscal year. This highlights the ongoing burden of public debt and its impact on Pakistan fiscal performance. High interest obligations limit fiscal space, reducing the government’s ability to allocate resources toward development and social welfare.
Defense spending was another major expenditure item, with Rs1,444 billion spent between July and December. While defense remains a strategic necessity, its sizeable share in total spending adds to fiscal pressures. Alongside defense and interest payments, other recurring expenses such as pensions, civil administration costs, and subsidies also contributed to higher overall expenditures.
In the first half of the fiscal year, the government borrowed Rs34 billion from external sources and Rs575 billion from local sources. This reliance on domestic borrowing reflects limited access to external financing and cautious engagement with international markets. At the same time, Rs504 billion was allocated for pensions, Rs380 billion for civil government expenses, and Rs462 billion for subsidies, all of which are structural components shaping Pakistan fiscal performance.
Additional revenues were generated through various levies. The government collected Rs822 billion through the Petroleum Development Levy (PDL), Rs8.8 billion through the CPP levy, and Rs25 billion from a carbon levy. These levies have become important non-tax revenue tools, especially in an environment where expanding the tax base remains politically and administratively challenging. Furthermore, the central bank transferred profits of Rs2,428 billion to the government between July and December, providing significant fiscal relief.
Fiscal transfers to provinces under the National Finance Commission (NFC) Award also formed a major component of government outflows. During the current fiscal year, a total of Rs3,616 billion was released to the provinces. Punjab received the largest share at Rs1,796 billion, followed by Sindh with Rs901 billion, Khyber Pakhtunkhwa with Rs586 billion, and Balochistan with Rs322 billion. These transfers are essential for provincial service delivery but also reduce the federal government’s fiscal flexibility.
The first-half data underscores both progress and challenges in Pakistan fiscal performance. The maintenance of a primary surplus and steady revenue collection are encouraging signs. However, rising expenditures, heavy interest payments, and structural spending commitments continue to strain the budget. Going forward, improving tax compliance, managing debt more effectively, and rationalizing expenditures will be critical for strengthening Pakistan fiscal performance.
while Pakistan’s fiscal position shows elements of stability, the underlying pressures remain significant. The coming months will test the government’s ability to balance economic support, development needs, and fiscal consolidation. Sustainable improvement in Pakistan fiscal performance will depend on consistent policy implementation, structural reforms, and careful management of both revenues and expenditures.
