Islamabad: Pakistan has achieved its first-ever fiscal surplus on a half-yearly basis, reporting a surplus of Rs542 billion or 0.4% of GDP for the first half of fiscal year 2026 (1HFY26). This milestone contrasts sharply with the deficit of Rs1.5 trillion or 1.3% of GDP recorded during the same period last year.

According to JS Global, the fiscal surplus was realized as total expenditures decreased by 10% during 1HFY26, while revenue grew by 9%. A significant factor contributing to this surplus was a 31% reduction in interest expenses, driven by a 33% decrease in local debt expenses. However, expenses on international debt rose slightly by 1.6%.

The primary surplus for 1HFY26 reached Rs4.1 trillion, or 3.2% of GDP, surpassing the International Monetary Fund's target of 2.6% of GDP for the fiscal year. In the second quarter alone, Pakistan posted a fiscal deficit of 1.2% of GDP, which is a marked improvement from the 3.0% deficit recorded in the same period last year. The primary surplus for the second quarter was 0.5% of GDP compared to 0.3% in the previous fiscal year's corresponding period.

Interest expenses during the second quarter of FY26 amounted to Rs2.2 trillion, reflecting a 43% year-on-year decrease due to falling interest rates. However, quarter-on-quarter, interest expenses rose by 59%, attributed mainly to seasonal and maturity factors in December and June.

Despite the fiscal surplus, subsidies and grant expenses saw a substantial increase of 42% year-on-year and 91% quarter-on-quarter, reaching Rs838 billion. This was largely due to the government's expenditure on flood and rescue efforts.

In light of the budget surplus, the government retired domestic debt amounting to Rs575 billion while incurring Rs34 billion in external debt during the first half of FY26.