• Punjab leads with Rs609bn cash surplus, followed by Sindh’s Rs354bn
• KP transfers Rs175bn; Balochistan sends Rs41bn
• Revenue-to-GDP ratio falls to 8.2pc in July-Dec despite reforms
ISLAMABAD: Amid a decline in the revenue-to-GDP ratio despite purported reforms, the four provinces reached close to meeting their IMF-dictated annual target of delivering a cash surplus to the Centre within the first half of the current fiscal year.
The official fiscal operations data released by the Ministry of Finance for July-December 2025 suggest the four provinces returned Rs1.18 trillion in cash to the Centre, just Rs285 billion short of the Rs1.464tr target set for the whole under the IMF’s $7bn Extended Fund Facility (EFF).
During the same period last year, the provinces had jointly produced over 50 lower surpluses worth Rs775bn against the budgeted target of Rs1.2tr.
With its larger fiscal muscle, Punjab led the provinces by providing Rs609bn budget surplus in six months, followed by Sindh’s Rs354bn. Khyber Pakhtunkhwa’s PTI government was not to be left behind as it extended Rs175bn surplus, while Balochistan also came up with Rs41bn bounty to the Centre.
This helped the federal government in containing fiscal balance in Rs542bn surplus when compared to Rs1.5tr deficit of last year — a turnaround of almost four times.
The six-monthly fiscal surplus came in at 0.4pc of GDP in the current year when compared to a deficit of 1.3pc of GDP last year. Despite this improvement, primary balance — the gap between total revenues and expenditures excluding interest payments — stood at 3.2pc of GDP when compared to 3.1pc of GDP last year, showing little improvement in government expenses despite the so-called rightsizing and administrative reforms.
Except for Balochistan, all three provinces appeared to be in competition and put in extra effort to create fiscal surpluses, given their healthy shares or were hampered by their institutional capacity to spend on their people. The Punjab government spared Rs610bn for the Centre this year, almost 83pc greater than Rs333bn of last year. Sindh provided Rs354bn this year against Rs264bn of last year, up 34pc.
Despite being an opposition administration, KP more than doubled (up 103pc) its budget surplus to Rs175bn this year when compared to its Rs86bn of the first half of last year. Balochistan had extended a surplus of Rs92bn to the Centre in the first six months of the fiscal year last year, but more than halved to Rs41bn in the current year.
On the other hand, the country’s revenue-to-GDP ratio dropped to 8.2pc in the first six months this year when compared to 8.5pc of the same period last year despite additional measures and so-called reforms.
The decline here was on both fronts, ie tax and non-tax. The data showed the tax-to-GDP ratio falling from 5.3pc in July-December of last year to 5.2pc this year. Non-tax revenue to GDP ratio also dropped from 3.2pc last year to 3.1pc this year, despite a 50pc increase in petroleum development alone to Rs823bn.
The Ministry of Finance data suggested the Centre’s own total revenue collection also dropped to 4.8pc of GDP from 4.9pc last year. This was mainly because of a decline in direct taxes to 2.3pc of GDP in the current fiscal, down from 2.4pc last year.
While the share of customs and excise duties remained unchanged at 0.5pc and 0.3pc of GDP, the general sales tax collection also fell to 1.6pc of GDP from 1.7pc last year. Provincial collection also remained static at 0.4pc of GDP.
On the expenditure front, total expenditure dropped to 7.8pc of GDP in the first half of the current year from 9.9pc of GDP last year, chiefly because of lower interest costs following the State Bank’s policy rate cut by half to 11pc from a historic 22pc a year earlier. Of this, current expenditure was down to 7.4pc of GDP as of Dec 31 this year when compared to 8.8pc last year.
The Ministry of Finance reported that the Federal Board of Revenue (FBR) collected Rs6.161tr during the first half of the current fiscal year, an increase of Rs536bn compared to the amount collected in the corresponding period of last year, a growth of 10pc.
Non-tax revenue was reported at Rs3.799tr, which included Rs2.428tr profit received from the State Bank of Pakistan. Petroleum development levy collection stood at Rs823bn, an increase of 50pc compared to the corresponding period of last year.
Provincial tax collection showed a robust 28pc growth to Rs569bn, an increase of Rs126bn compared to the corresponding period of the last fiscal. Provincial non-tax revenue was Rs155bn, showing an increase of Rs12bn compared to the corresponding period of the previous year, a growth of 8pc.
Published in Dawn, February 9th, 2026
