Key points:
- Fiscal deficit falls to 2.6 per cent of GDP
- Primary surplus reaches record 2.9 per cent
- Interest payments fall by nearly Rs 2 trillion
- S&P upgrades Pakistan’s sovereign credit rating
ISLAMABAD: Pakistan has recorded its strongest fiscal performance in more than two decades, with the fiscal deficit narrowing to 2.6 per cent of gross domestic product (GDP) in fiscal year 2025-26 and the primary surplus reaching a record 2.9 per cent of GDP.
The figures mark a sharp improvement from the country’s recent fiscal position, with the deficit falling from 7.9 per cent of GDP in FY22 to 7.8 per cent in FY23, 6.8 per cent in FY24, 5.4 per cent in FY25, and 2.6 per cent in FY26.
Pakistan posts primary surplus
Pakistan has also posted primary surpluses for three consecutive years, rising from 0.9 per cent of GDP in FY24 to 2.4 per cent in FY25 and 2.9 per cent in FY26.
The fiscal deficit stood at Rs 3.31 trillion in FY26, compared with the record primary surplus of Rs 3.63 trillion. Revenue collection reached Rs 19.8 trillion, including Rs 14.2 trillion in tax revenues, reflecting stronger revenue mobilisation and improved fiscal management.
𝗣𝗮𝗸𝗶𝘀𝘁𝗮𝗻 𝗥𝗲𝗰𝗼𝗿𝗱𝘀 𝗦𝘁𝗿𝗼𝗻𝗴𝗲𝘀𝘁 𝗙𝗶𝘀𝗰𝗮𝗹 𝗣𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲 𝗶𝗻 𝟮𝟮 𝗬𝗲𝗮𝗿𝘀
Pakistan has closed FY2025-26 with a historic strengthening of its public finances — marking a decisive shift from recurring fiscal stress toward discipline, stability and… pic.twitter.com/5gdCWI34QQ
— Khurram Schehzad (@kschehzad) August 13, 2026
Interest payments fell to around Rs 6.95 trillion from Rs 8.9 trillion last year, reducing the burden of debt servicing on government revenues. Interest payments accounted for around 35 per cent of total revenues in FY26, compared with about 61 per cent in FY24.
Development expenditure and net lending amounted to Rs 3.25 trillion during the year.
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The fiscal improvement is in line with the country’s efforts to strengthen its debt sustainability and reduce its dependence on borrowing to finance recurring budget gaps. Debt growth has slowed significantly, with the debt-to-GDP ratio declining to around 68 per cent.
The improvement in public finances has also been reflected in the country’s sovereign credit outlook. S&P Global Ratings upgraded its sovereign rating from B- to B with a stable outlook in July, citing faster fiscal consolidation, stronger revenue mobilisation, rebuilding foreign exchange reserves, and a decline in government debt relative to GDP.
The fiscal consolidation is part of a broader stabilisation effort aimed at reducing macroeconomic vulnerabilities, strengthening external buffers, and creating greater room for investment and development.
