Pakistan has achieved three out of five major fiscal conditions set by the International Monetary Fund (IMF) for the next USD 1 billion loan tranche, largely supported by high interest rates and strong petroleum levy collection. However, efforts to broaden the tax base fell short during the first half of the current fiscal year.
According to the Ministry of Finance’s fiscal operations summary for July–December, the government met targets for the primary budget surplus, provincial cash surplus, and provincial tax revenue. Yet it failed to reach benchmarks for overall tax collection and income tax receipts from the retail sector.
The Federal Board of Revenue (FBR) remained the weakest link, missing its downward-revised collection target of PKR6.49 trillion by PKR330 billion. The FBR also failed to generate the agreed PKR366 billion in income tax from the retail sector, despite expanding the scope beyond individual retailers to include corporate entities classified under retail activity.
Revenue performance during the period relied heavily on profits transferred by the State Bank of Pakistan and petroleum levy collection. The government booked an estimated PKR2.42 trillion in annual profits from the central bank, helping boost the primary surplus. Petroleum levy receipts reached PKR823 billion, collected from fuel consumption by both commercial and household users.
As a result, the federal government reported a primary surplus of PKR4.1 trillion against a target of PKR3.2 trillion, equivalent to 3.2% of GDP. The central bank has previously warned that sustaining the full-year primary surplus target could remain challenging.
Provincial governments exceeded agreed benchmarks, collectively generating a cash surplus of PKR1.18 trillion compared to a target of PKR752 billion. Provincial revenues reached PKR569 billion, surpassing the PKR488 billion target. Total provincial income stood at PKR4.7 trillion, with PKR3.6 trillion coming from the federal divisible pool under the NFC award.
Punjab recorded a surplus of PKR609 billion after revenues of PKR2.2 trillion and spending of PKR1.5 trillion, though accounts reflected a statistical discrepancy of PKR144 billion. Sindh posted a cash surplus of PKR353 billion, Khyber Pakhtunkhwa generated PKR175 billion, and Balochistan PKR42 billion, each also reporting statistical discrepancies.
Under the USD 7 billion IMF programme, Pakistan has committed to nearly 50 conditions, including a cumulative provincial cash surplus of PKR1.5 trillion for the full fiscal year. Conditions related to subsidies for the Benazir Income Support Programme and the power sector were also met.
On the expenditure side, federal spending totaled PKR7.1 trillion in the first half, with current expenditure at PKR6.8 trillion. Interest payments amounted to PKR3.6 trillion, lower year-on-year due to easing rates. Defence spending stood at PKR1.04 trillion, civil administration costs at PKR380 billion, and pension payments rose to PKR504 billion.
After accounting for provincial transfers and statistical discrepancies of PKR71 billion, the federal government’s net income for the first half was reported at PKR6.4 trillion, supported primarily by central bank profits and petroleum levy revenues.
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