Islamabad: Pakistan achieved a fiscal surplus of 0.9% of GDP, amounting to Rs1.3 trillion, in the first quarter of the fiscal year 2027, as reported in a recent press release. This performance represents a decline from the previous year's first-quarter surplus of 1.7% of GDP, or Rs2.1 trillion. The primary surplus was recorded at 2.1% of GDP, slightly above the International Monetary Fund's target of 2.0% for FY27.

According to JS Global, the year-over-year decline in the fiscal surplus is primarily attributed to reduced revenue, with the State Bank of Pakistan's profits experiencing a 20% decrease to Rs1.9 trillion. Total expenditures rose by 16% from the previous year, driven by a 23% increase in interest expenses, which reached Rs1.7 trillion. This increase is linked to a 100-basis point policy rate hike in May 2026, resulting in higher interest rates.

During this period, tax revenue saw a 7% increase to Rs3.4 trillion, with the Federal Board of Revenue's collection also climbing 7% to Rs3.1 trillion. Excluding interest expenses, overall expenditures increased by 12% year-over-year. The Public Sector Development Program (PSDP) spending surged by 59% to Rs468 billion, while defense expenditures rose 11% to Rs495 billion. Subsidies and grants, however, fell by 17% to Rs366 billion.

On the financing front, net external financing amounted to Rs609 billion, and non-bank financing reached Rs592 billion, aiding in the retirement of Rs2.5 trillion in bank borrowing. Gross external inflows totaled Rs1.25 trillion, including Rs910 billion in program loans, against repayments of Rs638 billion. Unlike the previous quarter, no privatization proceeds were recorded in 1QFY27.

The fiscal outlook anticipates a fiscal deficit of 3.6% of GDP and a primary surplus of 2.0% for the entire fiscal year 2027, as projected by experts.