ISLAMABAD: Pakistan has fulfilled only two out of five crucial fiscal benchmarks outlined by the International Monetary Fund (IMF) for the second review of its $7 billion bailout agreement. While the federal government met its primary budget surplus target and the provinces collectively achieved their revenue goals, it failed to meet key tax collection and provincial cash surplus requirements.
According to a fiscal report by the Ministry of Finance, the provincial governments could not generate the promised Rs1.2 trillion in cash surpluses, falling short by Rs280 billion. A sharp increase in provincial spending was a major contributing factor. Simultaneously, the Federal Board of Revenue (FBR) missed its tax revenue goal of Rs12.32 trillion, managing only Rs11.74 trillion. It also failed to generate the expected Rs50 billion under the Tajir Dost Scheme.
Despite these setbacks, Pakistan achieved a record-breaking primary budget surplus of Rs2.7 trillion—equal to 2.4% of GDP—which not only met but exceeded the IMF target. This marks the second consecutive year of a primary surplus and the highest in 24 years. The Finance Ministry undertook last-minute fiscal maneuvers to achieve this target, compensating for shortfalls at the provincial level.
Breakdown of provincial performance shows Punjab recorded a Rs348 billion surplus but had a Rs41 billion discrepancy due to debt-related spending. Sindh generated a Rs283 billion surplus with a Rs48 billion discrepancy. Khyber-Pakhtunkhwa (K-P) posted a Rs176 billion surplus but also showed a Rs155 billion discrepancy. Balochistan exceeded its targets, recording a Rs113 billion surplus.
On the non-tax revenue front, collections soared to Rs5.6 trillion—30% above the target—bolstered by Rs1.22 trillion in petroleum levy following rate hikes to Rs78 per liter. However, FBR's inability to bring traders into the tax net remains a challenge, as salaried individuals contributed Rs555 billion in taxes, far outweighing traders’ contributions.
Federal spending reached Rs17.1 trillion, including Rs15.8 trillion in current expenses. Interest payments alone rose to Rs8.9 trillion, while defence spending increased by 18% to Rs2.2 trillion. The federal PSDP (Public Sector Development Programme) also expanded to Rs1.05 trillion, up 43% from the previous year.
