Rising interest payments, uplift spending strained Pakistan's fiscal position in early FY27: ministry

ISLAMABAD: Despite a massive 90 per cent cut in subsidies and higher-than-targeted revenue collection, Pakistan’s fiscal and current account buffers weakened at the beginning of the current fiscal year (FY27) owing to an almost 37pc increase in interest payments coupled with greater development spending. The “overall fiscal surplus narrowed to 0. 8pc of GDP (Rs1. 198 trillion), compared with 1. 7pc of GDP (Rs2. 124tr)” in the corresponding period of FY26, said the Ministry of Finance’s Monthly Economic Update & Outlook report issued on Thursday. “Similarly, the primary surplus declined to 1. 6pc of GDP (Rs2. 3tr), from 2. 3pc of GDP (Rs2. 94tr) recorded in the same period last year,” it added in the report’s October edition. The government, however, pledged to keep fiscal policy focused on preserving stability through stronger revenue mobilisation and prudent expenditure management.

The report said the overall fiscal operations began on a positive note in FY27 as tax revenues surpassed target. Net federal revenue amounted to Rs2. 9123 trillion, exceeding federal expenditure of Rs2. 124tr. This contributed to a federal fiscal surplus equivalent to 0. 5pc. The Federal Board of Revenue’s (FBR) tax collection posted 3. 6pc growth during July-August. Total expenditure increased by 20. 7pc, “driven primarily by a 69. 5pc surge in development expenditure, significantly outpacing the 14. 7pc growth in current expenditure”, the report said. “The relatively moderate increase in current expenditure was largely attributable to an 8. 1pc decline in non-interest expenditure, mainly reflecting a sharp 90pc reduction in subsidies. In contrast, mark-up payments increased by 36. 6pc,” it highlighted. While flagging the geopolitical tensions , trade disruptions, elevated commodity prices and uncertainty…