Pakistan’s fiscal deficit narrows to 22-year low of 2.6% of GDP in FY26: Schehzad

Adviser to the Finance Minister Khurram Schehzad reported that Pakistan's fiscal deficit in the fiscal year 2025-26 reached 2.6% of GDP, marking the lowest level in over two decades. This downward trend has continued for three consecutive years, with the government recording a primary surplus of 2.9% of GDP in FY26. The previous fiscal deficit stood at 7.9% of GDP in FY22.

Schehzad highlighted this as the strongest fiscal performance in 22 years, emphasizing the shift from recurrent fiscal stress to discipline, stability, and sustainable growth. Over the past three years, the fiscal deficit improved by 5.2 percentage points of GDP, while the primary balance shifted by 3.9 percentage points, from a 1.0% deficit to a record 2.9% surplus.

The government's overall fiscal deficit for FY26 was Rs3.31 trillion, with a primary surplus of Rs3.63 trillion. Revenues amounted to Rs19.8 trillion, including Rs14.2 trillion in tax receipts, while interest payments decreased to about Rs6.95 trillion from Rs8.9 trillion in the previous year. Private sector credit reached Rs11.38 trillion in FY26.

Schehzad noted that debt growth had slowed to a 20-year low, and the government's debt-to-GDP ratio declined to about 68%. This fiscal consolidation has also improved Pakistan's external position, with rebuilding foreign-exchange reserves and a stronger external account. The upgrade to B from B- by S&P Global Ratings in July was attributed to faster fiscal consolidation, stronger revenue mobilization, rebuilding reserves, and declining government debt-to-GDP.