July-March: budget deficit reaches Rs856.4bn mark

ISLAMABAD: Pakistan’s fiscal position sharply deteriorated in the third quarter of fiscal year 2025-26 as the overall budget balance swung to a deficit of Rs856.4 billion — equivalent to 0.7 per cent of GDP — during the first nine months (July-March), compared to a surplus of Rs541.9 billion i.e. 0.4 percent recorded in the first half of the fiscal year, according to official data released by the Finance Division.

Fiscal operation data released by the Finance Division did not highlight collections under the agricultural income tax, a provincial subject, that was part of the Finance Bill 2025 to be effective from January 2025 as a condition of the ongoing International Monetary Fund programme.

Sales tax on services was the single largest revenue generator for all provinces with Punjab overtaking Sindh in collecting 244.2 billion rupees under this head, Sindh at 241.2 billion rupees, Khyber Pakhtunkhwa 34.7 billion rupees and Balochistan 16 billion rupees.

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Fiscal operations data noted that primary balance of Rs 4,091 billion, equivalent to 3.2 percent of gross domestic product (GDP) was posted in the first nine months of the current fiscal year 2025-26.

Primary balance was Rs 4,105 billion in the first six months of the current fiscal year.

Federal PSDP stood at Rs 322.998 billion during the first three quarter of current fiscal year, 32.3 percent of what was budgeted in June 2025. Defence related expenditure stood at Rs1,689 billion during the first three quarter of current fiscal year.

The statistical discrepancy stands at Rs -443.554 billion in the first nine months of the current fiscal year against Rs-413.3 billion till the first half of the current fiscal year.

Statistical discrepancy of the federal government was recorded at Rs. 59 billion. Primary reasons for this are; increase in commercial bank deposits, variations on account of time lag in reporting and book adjustments amongst SBP, FBR and EAD data.

Statistical discrepancy of the provincial governments was recorded at Rs (-)503 billion. The province-wise reasons for this discrepancy are: statistical discrepancy for Punjab &Sindh recorded at Rs. (-) 247 billion & (-) 40 were mainly on account of increase in commercial bank deposits and time lag. Statistical discrepancy of KPK and Balochistan governments were reported at Rs.(- )112 billion & Rs. (-)104 billion respectively attributed to movement in commercial bank deposits.

The data further noted that total revenues of the country fetched Rs 14,799 billion i.e. 11.4 percent of GDP in the first nine months of current fiscal year 2026, out of which the FBR collected Rs 9,305 billion and non-tax revenue accounted for Rs 4,632 billion.

FBR collected Rs. 9,306 billion during upto 3rd quarter of current fiscal year, an increase of Rs. 853 billion compared to the amount collected in the corresponding period of last fiscal year (a growth of 10 percent).

Out of non-tax revenues of Rs 4632 billion, the petroleum levy fetched Rs 1,205 billion, petroleum levy on LPG Rs2.560 billion, captive power plants levy Rs 11.358 billion, carbon levy Rs 37.268 billion, NEV adoption levy Rs 17.775 billion in the first nine months of the current fiscal year.

The surplus profit of SBP in the first nine months was the largest single item in the non-tax revenue to the tune of Rs 2428 billion.

The PTA profit stood at Rs 26.538 billion, royalties on oil and gas Rs 92.973 billion, passport fees Rs 35.251 billion, natural gas development surcharge Rs 43.076 billion, mark-up (PSEs and others) Rs 100.213 billion.

Total expenditure remained at Rs 16,099 billion out of which the current expenditure stood at Rs 14,267 billion. Federal government current expenditure stood at Rs 9870 billion. The markup payment of domestic debt stood at Rs 4947 billion (69 percent of what was budgeted) and foreign debt repayment of Rs 660.328 billion.

The report noted that primary current expenditures were managed prudently with spending recorded at Rs. 4,922 billion. It noted that as a result of tight fiscal discipline, cash management and early retirement of Rs. 1.9 trillion domestic debt, savings of Rs. 1.495 trillion in servicing of domestic debt were observed as compared to the same period last fiscal year.

Provincial tax collection was recorded at Rs. 861 billion, an increase of Rs. 176 billion compared to the corresponding period of last fiscal year (a growth of 26%), which is well above the assigned targets.

Provincial non-tax revenue was Rs. 278 billion showing an increase of Rs.75 billion compared to the corresponding period of previous fiscal year (a growth of 37%). Current expenditure stood at Rs. 4,397 billion, well within the assigned target. All provinces are performing within the given targets. Development expenditure was recorded at Rs. 1,614 billion.

The uptick in spending was seen on account of Governments of Punjab, Sindh and Balochistan. The pension bill consumed Rs 753.682 billion, the running of the government Rs 629. 002 billion, subsidies Rs 631.961 billion and grants to others Rs 1,217.876 billion. Transfer to provinces under NFC remained at Rs 5,630.775 billion.

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