EDITORIAL: The Finance Division has uploaded consolidated fiscal operations (federal and provincial) data for July December 2025-26 revealing a significant rise in current expenditure in the second quarter of the current year (October-December) against the first quarter (July-September) - from 4 trillion rupees to 5.5 trillion rupees for the half year - a rise sourced to a rise in mark-up payments (from 1.38 trillion rupees in the first three months to 3.56 trillion rupees for the half year in spite of a decline in domestic bank borrowing from negative 2.192 trillion rupees to negative 325.4 billion rupees) while non-bank borrowing registered positive 112 billion rupees in the first quarter to negative 250.4 billion rupees July-December, largely from the savings centres.
The negativity may be indicative of lower savings due to high cost of living and the inability of the private sector to raise wages for the past five years.
Defence outlay rose from 447.487 billion rupees to 1 trillion rupees July-December, understandable given the rise in operational costs due to an uptick in terror attacks.
Primary balance, minus borrowing costs, therefore improved from 3.497 trillion rupees to 4.106 trillion rupees during the first six months, but the budget balance declined from 2.119 trillion rupees July-September to only 541.882 billion rupees by end December 2025 though in percentage terms the deficit declined from 1.6 percent to 0.4 percent – a decline premised on the budgeted GDP of 129,567 billion rupees.
The GDP estimates are currently under review as per the IMF’s ongoing TA, which concluded that “important shortcomings remain in the source data available for sectors accounting for around a third of GDP.”
READ MORE: Fiscal operation data unveiled: Country posts Rs4.105trn primary balance in H1
Development expenditure and net lending rose from 295 billion rupees July-September 2025 to 963,869 billion rupees July-December 2025 – a rise more indicative of net lending rather than disbursements as the Ministry of Planning, Development and Special Initiatives website notes that while authorization for development July-December was 356 billion-rupees actual expenditure was 210 billion rupees – a shortfall of 40 percent in actual disbursements.
Tax collected by the Federal Board of Revenue rose from 2.9 trillion rupees July-September to 6.1 trillion rupees July-December 2025, indicative of a contractionary fiscal policy with negative repercussions on Gross Domestic Product (GDP) growth, yet the rise in current expenditure by end December 2025 is higher which strengthens Business Recorder’s suggestion to focus on reducing current expenditure rather than raising tax collections in the short term. The largest increase in non-tax collections was from petroleum levy - from 371.6 billion rupees July-September to 822.927 billion rupees July-December – a rise that explains why the non-bank borrowing, reflecting the general public’s savings in National Savings Centres declined.
Provinces increased their tax collections – from 268.9 billion rupees to 568.5 billion rupees; however, this rise was largely from sales tax on services - from 146.7 billion rupees in the first quarter against 329 billion rupees for the first six months – and not from the farm tax on rich landlords and real estate tax, the two major sources that were envisaged by the International Monetary Fund to raise the provinces’ capacity to increasingly rely on their own resources. Transfers from the federal government to provinces doubled – from 1.77 trillion rupees to 3.6 trillion rupees by end December – which accounted for an appreciable increase in provincial spending.
Statistical discrepancy doubled – from negative 261 billion rupees to negative 413 billion rupees with provinces noting a discrepancy decline – from negative 354.7 billion rupees to negative 341.8 billion rupees. It is relevant to note that in addition the IMF noted a minimum of 11 billion dollar statistical discrepancy in Pakistan’s import data which requires a comprehensive review. These discrepancies need to be minimized in the third and fourth quarters of the current fiscal year.
Copyright Business Recorder, 2026
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