Pakistan Business

Pakistan records first-ever fiscal surplus in FY25's first quarter

The surplus in the first quarter of fiscal year 2024-25 (FY25) was around PKR 1,696 billion

Pakistan records first-ever fiscal surplus in FY25's first quarter
A stack of Pakistani rupee notes
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Pakistan posted its first-ever fiscal quarterly surplus in the July-September period, compared to the deficit of PKR 980 billion in the same period last year, according to the data shared by the Ministry of Finance on Thursday.

The surplus in the first quarter of fiscal year 2024-25 (FY25) was around PKR 1,696 billion, while fiscal surplus as a percentage of GDP was around 1.4% compared to a deficit of 0.9% recorded in the same period a year ago.

This is only the second time the country recorded a quarterly surplus since 2004, which means it took two decades to land in the surplus column.

Primary balance was PKR 3,002 billion during July to September as against PKR 400 billion during the same period last year. It was 2.4% of the GDP in the period under review as against 0.4% of the same period last year.

Hefty profit

The primary factor for the surplus was the hefty profit recorded by State Bank of Pakistan, amounting to PKR 2.5 trillion. Higher profit incurred by the central bank was mainly driven by interest rate which peaked to 22%. The easing monetary cycle commenced from June and since then, the benchmark interest rate has been clipped by 450 bps to 17.5%.

Analysts expect more cuts in benchmark interest rate by another 200-300 bps, in line with easing inflation. The SBP's monetary policy meeting is scheduled for November 4 while inflation numbers are to be released on November 1.

According to a research note from Arif Habib Ltd., a primary surplus of PKR 3 trillion was achieved in the first quarter of the current fiscal year, marking the largest primary surplus recorded to date.

On the other hand, markup payments showed a decline of 5.3% to PKR 1,306 billion recorded during July to September period compared with PKR 1,379 billion of the same period last year, the data said. The main factor behind this decline has been the cut in the benchmark interest rate.

Tax revenue in the first quarter rose to PKR 2,776 billion, compared to PKR 2,217 billion of the same period last year, showing an increase of 25%. The main factor behind the surge in the revenue collection — though it fell short of the target given by IMF — was because of an extensive drive from the tax collection authority to tap all avenues to generate more revenues.

From next month, all non-filers will get harsh treatment, with the Federal Board of Revenue serving notices to non-filers which have filed nil-tax returns. It is learned that around 1.26 million have filed nil returns.

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