Pakistan achieved its most impressive economic results in decades. The nation’s fiscal performance FY26 exceeded all expectations dramatically. Therefore, Pakistan fiscal performance FY26 marks a historic turning point for the economy. The fiscal deficit narrowed to 2.6 percent of GDP—a remarkable achievement. Additionally, the primary surplus reached a record 2.9 percent of GDP. Economic growth accelerated to 3.7 percent, the fastest pace in four years. GDP expanded to a record $452.1 billion in nominal terms.
The fiscal deficit improvement proves especially significant contextually. Pakistan’s deficit stood at 7.9 percent of GDP in FY2022. By FY2026, it had contracted to just 2.6 percent—a reduction of 5.2 percentage points. This three-year turnaround reflects disciplined fiscal management throughout. Strict expenditure control combined with revenue mobilization efforts. Additionally, ongoing IMF program reforms supported structural improvements. The July-to-March period showed even stronger performance at 0.7 percent deficit—the strongest in decades according to Reuters analysis.
The primary surplus achievement deserves special recognition. Pakistan recorded a 2.9 percent primary surplus—the highest in at least 26 years. This marks the third consecutive year of primary surplus generation. The achievement reverses FY2022’s primary deficit of 3.1 percent completely. Lower fiscal pressures reduce strain on government borrowing substantially. Furthermore, this creates greater space for development spending activities. Additionally, Pakistan gains enhanced ability to absorb economic shocks moving forward.
Inflation pressures eased significantly supporting price stability. Average CPI inflation reached around 6.7 percent over most of the fiscal year. This moderation provided relief to consumers across all income categories. Financial markets responded positively to improving fundamentals. The Pakistan Stock Exchange’s KSE-100 index surged over 18 percent. Initial public offerings reached two-decade highs demonstrating investor confidence. S&P Global Ratings upgraded Pakistan’s sovereign rating to B with stable outlook. The rating agency cited stronger fiscal consolidation and improving fundamentals directly.
Debt management improved remarkably despite challenging circumstances. Central government debt reached PKR 83.642 trillion by June 2026. This represented a 7.4 percent increase—the slowest pace in 20 years. Finance Adviser Khurram Shehzad announced PKR 4.722 trillion in early debt repayments. This included PKR 2.9 trillion in prepayments ahead of schedule. The debt-to-GDP ratio declined to approximately 68 percent from 75.2 percent in 2023. This improvement reflects the stronger fiscal position comprehensively.
Economic growth disappointed expectations slightly yet remained respectable. Pakistan targeted 4.2 percent GDP growth but achieved 3.7 percent. Still, this represented the highest growth since FY2022 when GDP contracted 0.2 percent. Comparatively, FY2024 achieved 2.6 percent growth and FY2025 reached 3.2 percent. Therefore, the trajectory shows consistent improvement year-over-year. The government emphasizes that stronger fiscal performance creates durable foundations. Finally, sustainable and inclusive economic growth depends on maintaining these discipline levels going forward.
