ISLAMABAD: Pakistan’s $7 billion bailout agreement with the International Monetary Fund (IMF) largely stayed on track over the first nine months of the fiscal year, with both federal and provincial governments meeting three of the five main fiscal benchmarks. However, the Federal Board of Revenue (FBR) remained the weakest link.
According to a fiscal summary released by the Ministry of Finance on Wednesday, the FBR failed to meet two key goals: collecting Rs9.17 trillion in total revenue and raising Rs36.7 billion from retailers under the Tajir Dost scheme between July and March.
Despite hitting critical revenue targets, the federal government still fell short by Rs394 billion when it came to covering just two major expenses: interest payments and defence spending.
The fiscal report showed success on several IMF benchmarks, including the federal government’s primary budget surplus and the provinces’ cash surplus and net revenue collection targets. The federal government reported a primary surplus of Rs3.5 trillion (2.8% of GDP), exceeding the IMF target of Rs2.7 trillion. This was largely due to booking the full year’s central bank profits (Rs2.5 trillion) in the first quarter.
Provincial governments also exceeded expectations. Collectively, they generated a cash surplus of Rs1.028 trillion — Rs25 billion above the IMF goal. They raised Rs685 billion in tax revenues, surpassing the target by Rs79 billion. The Finance Ministry credited Sindh, Khyber Pakhtunkhwa (K-P), and Balochistan for strong tax collection but notably did not mention Punjab.
Provincial non-tax revenues reached Rs203 billion, beating the Rs160 billion target by Rs43 billion — a result of collective provincial efforts, the ministry said.
However, federal tax performance lagged. The FBR failed to generate meaningful income from the Tajir Dost Scheme, where the target was Rs36.7 billion. Traders’ contributions via withholding taxes were minimal compared to the salaried class, which paid Rs391 billion over the nine months.
Overall, the FBR collected Rs8.5 trillion, falling Rs715 billion short of its nine-month target of over Rs9.2 trillion.
Non-tax revenues — including profits from the central bank and petroleum levies paid by millions — reached over Rs4 trillion, exceeding the target by Rs71 billion. Notably, the petroleum levy brought in Rs834 billion, up from Rs720 billion the previous fiscal year.
Provincial governments enjoyed fiscal breathing room due to higher federal transfers under the National Finance Commission (NFC) award. Between July and March, the four provinces spent about Rs5.3 trillion, with Rs1.2 trillion going to development. Their total revenues stood at Rs6.1 trillion, with Rs5.1 trillion coming from federal tax shares.
A closer look showed Punjab generated Rs2.9 trillion in total revenue, spent Rs2.4 trillion, and posted a surplus of Rs441 billion — though it recorded a Rs117 billion statistical discrepancy due to below-the-line wheat debt repayments. Sindh reported a cash surplus of Rs395 billion after spending Rs1.5 trillion and noted a Rs10 billion discrepancy. K-P achieved a budget surplus of Rs111 billion, with Rs1.03 trillion in income and Rs920 billion in spending, alongside a Rs13 billion discrepancy. Balochistan posted a surplus of Rs105 billion, aided in part by a recent Rs8 per litre hike in the petroleum levy to fund provincial roads.
The Finance Ministry noted that Punjab and Balochistan exceeded their development budgets, while Sindh and K-P stayed within limits.
Under the IMF programme, Pakistan has committed to roughly 40 conditions, including provincial cash surpluses totaling Rs1.217 trillion for the fiscal year.
On the spending side, the federal government disbursed Rs11.5 trillion in nine months, with current expenditures hitting Rs10.7 trillion — a 19% (Rs1.9 trillion) increase from last year, mainly driven by rising interest costs. Interest payments alone reached Rs6.4 trillion, up Rs921 billion from the previous year, while defence spending rose 16.5% to Rs1.42 trillion.
After accounting for provincial transfers, the federal government’s net income stood at Rs7.5 trillion — Rs394 billion less than the combined spending on interest and defence. The ministry reported that primary current expenditures were kept under control, with actual spending at Rs4.3 trillion against a target of Rs5.2 trillion, mainly due to reduced subsidy releases (only 49% of the allocation was used). Development spending also lagged, with Rs309 billion spent compared to the Rs658 billion target.
