• Punjab contributes Rs609bn, followed by Sindh with Rs354bn
• KP transfers Rs175bn; Balochistan Rs41bn
• Revenue-to-GDP ratio slips to 8.2pc in July–Dec despite reforms
ISLAMABAD: Even as the country’s revenue performance weakened relative to the size of the economy, the four provinces nearly met their IMF-mandated annual cash surplus target within the first half of the current fiscal year, providing significant relief to the federal exchequer.
Official fiscal operations data released by the Ministry of Finance for July–December 2025 show that the provinces collectively transferred Rs1.18 trillion to the Centre — just Rs285 billion short of the full-year target of Rs1.464 trillion agreed under the IMF’s $7 billion Extended Fund Facility (EFF).
By comparison, in the same period last year, provincial governments generated a combined surplus of Rs775bn, well below the budgeted target of Rs1.2tr.
Punjab, with the largest fiscal capacity, led the way by posting a Rs609bn surplus over six months, followed by Sindh at Rs354bn. Khyber Pakhtunkhwa transferred Rs175bn, more than double its surplus in the corresponding period last year, while Balochistan contributed Rs41bn.
These transfers helped the federal government swing to a fiscal surplus of Rs542bn during the first half of the year, compared with a Rs1.5tr deficit in the same period last year — an improvement of nearly fourfold.
As a result, the consolidated fiscal balance stood at a surplus of 0.4 per cent of GDP, compared to a deficit of 1.3pc of GDP a year earlier. However, the primary balance — excluding interest payments — showed little change, improving marginally to 3.2pc of GDP from 3.1pc last year, indicating limited progress in curbing underlying expenditures despite repeated claims of rightsizing and administrative reforms.
Except for Balochistan, all provinces substantially increased their cash surpluses. Punjab’s contribution surged by 83pc to Rs609bn from Rs333bn last year, while Sindh’s surplus rose 34pc to Rs354bn from Rs264bn. KP recorded the sharpest increase, with its surplus jumping 103pc from Rs86bn to Rs175bn. In contrast, Balochistan’s surplus more than halved, falling to Rs41bn from Rs92bn in the first half of the previous fiscal year.
Despite these gains, Pakistan’s overall revenue effort weakened. The revenue-to-GDP ratio declined to 8.2pc during July–December, down from 8.5pc in the same period last year, reflecting slippages in both tax and non-tax revenues.
The tax-to-GDP ratio edged down to 5.2pc from 5.3pc, while non-tax revenue fell to 3.1pc of GDP from 3.2pc, despite a 50pc jump in petroleum development levy (PDL) collections to Rs823bn.
Federal government revenues also dipped slightly, with the Centre’s own revenue declining to 4.8pc of GDP from 4.9pc last year. Direct taxes fell to 2.3pc of GDP from 2.4pc, while customs and excise duties remained unchanged at 0.5pc and 0.3pc of GDP, respectively. General sales tax receipts slipped to 1.6pc of GDP from 1.7pc, and provincial revenue collection stayed flat at 0.4pc of GDP.
On the expenditure side, total spending declined sharply to 7.8pc of GDP from 9.9pc last year, largely due to lower interest payments following the State Bank’s policy rate cut to 11pc from a record 22pc a year earlier. Current expenditure fell to 7.4pc of GDP by Dec 31, compared with 8.8pc in the same period last year.
The Ministry of Finance reported that the Federal Board of Revenue collected Rs6.161tr in the first half of the fiscal year, marking an increase of Rs536bn, or 10pc, over the corresponding period last year.
Non-tax revenues amounted to Rs3.799tr, including Rs2.428tr in profits transferred by the State Bank of Pakistan. Meanwhile, provincial tax revenues rose sharply by 28pc to Rs569bn, an increase of Rs126bn, while provincial non-tax revenues increased 8pc to Rs155bn.