ISLAMABAD: Claiming a rare federal fiscal surplus of Rs 1.5 trillion (instead of usual deficits) in the first quarter of the current fiscal year, the government on Monday admitted to rising prices of essential commodities due to supply disruptions caused by floods and the closure of the Pakistan-Afghanistan border.
“Flood-related supply disruptions and temporary border closures have put upward pressure on prices of some commodities,” the Finance Ministry said in its October 2025 Monthly Economic Outlook and Update. However, it stated that inflation would remain in the target range of 5-6 percent this month, which had already reached 5.6 percent in September, against the Ministry of Finance’s forecast. Treasury of 3.5-4.5 percent made on September 30.
The Finance Ministry said net federal revenue rose 231.4 percent to Rs 3.27 trillion in the first two months (July-August) of FY26, compared with Rs 986.7 billion in the same period last year. This was driven by a 721.1 percent increase in non-tax revenue and a 14.1 percent increase in FBR tax collection.
“The increase in non-tax revenue was mainly due to higher profits of the State Bank of Pakistan, supplemented by higher dividend income, defense income, windfall tax against crude oil, gas infrastructure development tax and petroleum tax. During July-September FY26, FBR’s tax collection increased to Rs 2.884 trillion, an increase of 12.5 percent.
Finance Ministry warns of inflation due to supply disruptions and trade obstacles
On the spending side, total disbursements increased modestly by 7.6% to Rp 1.76 trillion. “Consequently, the federal fiscal balance recorded a surplus of Rs 1,509 trillion, compared to a deficit of Rs 648.8 billion last year. The primary balance also improved markedly, recording a surplus of Rs 2,939 trillion, against Rs 49,400 billion in the corresponding period,” it said.
He said climate crises affected agriculture, but the sector showed early signs of resilience. According to a preliminary assessment, the recent flood has caused losses of Rs 430 billion to the agricultural sector, damaging crops such as rice, cotton, sugarcane, cereals, fodder and vegetables. “However, recent indicators suggest that recovery efforts are underway, supported by increased agricultural credit, higher machinery imports and increased fertilizer extraction,” he said.
On the other hand, the Ministry of Finance hoped to improve export prospects, driven by greater economic momentum in Pakistan’s export destinations. “The position of the US, UK, China and Eurozone composite leading indicator has further strengthened compared to the last month, and all have moved above or near their long-term potential levels, indicating better export prospects for Pakistan,” he said.
The monthly report said Pakistan’s economy maintained its recovery path despite flood-related disruptions. “Industrial activity remains resilient, supported by a rebound in large-scale manufacturing, particularly in cement, automobiles and allied sectors, while exports and remittances are showing steady improvement,” he said, adding that the external sector remained stable, with a current account surplus recorded in September, amid strong remittance inflows.
He highlighted the successful review of the IMF under the Extended Fund Facility and the Resilience and Sustainability Facility, noting that it reaffirmed confidence in Pakistan’s reform trajectory and prudent macroeconomic management. “The continued progress on privatization, digital governance and joint ventures of CPEC Phase 2.0 underlines the government’s commitment to fiscal consolidation, structural transformation and sustainable and inclusive growth,” the report added.
The Ministry of Finance said the government would remain firmly committed to maintaining fiscal discipline and providing targeted social protection within a sound and forward-looking macroeconomic policy framework.
Published in Dawn, October 28, 2025
