Pakistan recorded its strongest fiscal performance in more than two decades in fiscal year 2026, with the fiscal deficit narrowing to 2.6% of GDP and the primary surplus reaching a record 2.9% of GDP. The economy grew 3.7%, its fastest pace in four years, reaching a record size of $452.1 billion, according to government data.
What are Pakistan's key economic indicators for FY2026?
Pakistan's fiscal deficit fell to 2.6% of GDP in FY26, down from 7.9% in FY2022, an improvement of 5.2 percentage points over three years. The primary surplus of 2.9% of GDP is the highest in at least 26 years and the third consecutive year of primary surplus. Debt growth slowed to a 20-year low of around 7.7%, while the debt-to-GDP ratio fell to approximately 68% from higher levels in earlier years.
Average CPI inflation eased to around 6.7% over much of the fiscal year, supporting price stability. The Pakistan Stock Exchange's KSE-100 index surged over 18%, accompanied by a two-decade high in initial public offerings. S&P Global Ratings upgraded Pakistan's sovereign rating to B with a stable outlook, citing stronger fiscal consolidation and improving sovereign fundamentals.
How did Pakistan's fiscal deficit improve in FY26?
The fiscal deficit fell from 7.9% of GDP in FY2022 to 2.6% in FY2026, a reduction driven by strict expenditure control, revenue mobilisation, and ongoing reforms under the International Monetary Fund programme. In the July-to-March period alone, the fiscal deficit stood at just 0.7% of GDP, which Reuters and the Pakistan Economic Survey described as the strongest fiscal performance in decades. The primary surplus for the same period reached between 2.5% and 3.2% of GDP across different tracking periods.
The improvement marks a sharp reversal from FY2022, when Pakistan also recorded a primary deficit of 3.1% of GDP. Lower fiscal pressures have reduced strain on government borrowing and are expected to create greater space for development spending while improving Pakistan's ability to absorb economic shocks.
What does Pakistan's debt position look like after FY26?
Pakistan's central government debt reached PKR 83.642 trillion by June 2026, a 7.4% increase, though this represents the slowest pace of debt growth in 20 years. Finance Adviser Khurram Shehzad announced that Pakistan repaid PKR 4.722 trillion in debt ahead of schedule during FY2026, including PKR 2.9 trillion in early repayments. The debt-to-GDP ratio declined to around 68%, compared with 75.2% in 2023, reflecting the improved fiscal position.
The government said the stronger fiscal performance creates a more durable foundation for sustainable and inclusive economic growth. Pakistan missed its 4.2% GDP growth target for FY26, recording 3.7% instead, though this still represented the highest growth rate since FY2022 when GDP contracted by 0.2%. GDP growth was 2.6% in FY2024 and 3.2% in FY2025.
Comments
See what people are discussing