Pakistan recorded a fiscal surplus of Rs1.31 trillion, equivalent to 0.9% of GDP, in the first quarter of FY27, down from Rs1.71 trillion (1.7% of GDP) in the same period last year, as lower non-tax revenues offset gains in tax collection, according to AKD Research.

In a report reviewing the country’s fiscal performance, the research house noted that total revenues slipped 3% year-on-year to Rs6 trillion during July-September FY27. The decline was driven mainly by a 14% drop in non-tax revenues to Rs2.62 trillion, largely due to a 36% fall in surplus profits transferred by the State Bank of Pakistan.

Despite the fall in non-tax receipts, tax revenues increased 7% year-on-year to Rs3.39 trillion. AKD Research attributed the improvement mainly to a 16% rise in direct tax collection and a 14% increase in sales tax revenues, reflecting stronger revenue mobilisation efforts.

On the expenditure side, total spending increased 16% year-on-year to Rs4.73 trillion. The report said higher debt-servicing costs remained the key driver, with markup payments rising to Rs1.7 trillion, up 23% from the same period last year, amid an elevated interest-rate environment.

The research house highlighted that Pakistan achieved a primary surplus of Rs2.97 trillion during the quarter, compared with Rs3.50 trillion a year earlier. Meanwhile, development spending rose sharply by 61% year-on-year to Rs475 billion, signalling increased public-sector investment activity.

AKD Research further noted that the fiscal balance was supported by Rs609 billion in external financing, while the government retired Rs1.83 trillion in domestic debt during the quarter. However, it cautioned that sustaining fiscal discipline and broadening the revenue base would remain crucial to maintaining macroeconomic stability in the coming quarters.