Rising interest payments, uplift spending strained Pakistan's fiscal position in FY27's 1st quarter: 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 in the first quarter 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 (July-September) of FY26, said the Ministry of Finance in its 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. The government, however, pledged to keep fiscal policy focused on preserving stability through stronger revenue mobilisation and prudent expenditure management, the report said.

Flagging the geopolitical tensions , trade disruptions, elevated commodity prices and uncertainty around technology investment as principal downside risks, the report noted that the government also expressed cautious optimism over continued economic recovery, drawing support from better crop output, selective manufacturing industries and improving external earnings. “The recovery in FY2027 is expected to draw support from improving crop prospects, selected manufacturing industries, domestic construction activity and expanding external earnings,” the finance ministry said in its report. It hoped that steady demand in Pakistan’s main markets – the United States , the United Kingdom and the Organisation for Economic Cooperation and Development (OECD) – would support the outlook for goods and services exports . It said the overall fiscal operations began on a positive note in FY27 as tax…