Islamabad, Feb 7 (.) As Pakistan’s economy falls deeper into dire straits, its debt servicing dwarfed both its defence and development spending in the first half of the current fiscal year, adding to the massive strain on Pakistan’s already crumbling economy under the weight of the tight conditions imposed by the International Monetary Fund (IMF), as part of its ongoing fiscal programme.
According to official financial data, interest payments on the country’s accumulated public debt absorbed over PKR3,563 billion (around $12.7 billion) between July and December of CFY26, making it more than twice the combined outlay on defence and development, with defence spending standing at PKR1,044 billion (about $3.7 billion) and allocations under the Public Sector Development Programme (PSDP) limited to just PKR238 billion (roughly $850 million) over the same period.
Fiscal accounts also continued to show a sizeable statistical discrepancy, amounting to PKR413.3 billion (approximately $1.5 billion) in the first half of CFY26, only slightly lower than the PKR439.7 billion amount recorded in the corresponding period last year.
Punjab accounted for a sizable chunk, filling in over PKR144.4 billion of this gap, while total provincial discrepancies reached PKR342 billion.
Despite these pressures, strict IMF oversight has helped the federal government post a fiscal surplus of PKR542 billion (about $1.9 billion) during July-December, a sharp turnaround from a PKR1,537 billion deficit in the same period of the previous fiscal year.
The primary balance – a key IMF benchmark that excludes interest payments — showed a surplus of Rs4,105 billion, equivalent to 3.2% of GDP, compared with Rs3,600 billion or 3.1% of GDP a year earlier.
An IMF review mission is expected to arrive in Islamabad by the end of this month or early next month to conduct the third review of the $7 billion Extended Fund Facility (EFF). The mission is also expected to shape the broad framework of the 2026–27 federal budget, with particular focus on new taxation measures by the Federal Board of Revenue (FBR).
Data released by the Ministry of Finance on Friday showed that total revenues reached PKR10,683 billion (around $38 billion) in the first half of CFY26. Of this, the FBR contributed PKR160 billion (about $22 billion), while non-tax revenues stood at PKR54 billion (nearly $14.1 billion).
Within non-tax revenues, the petroleum levy generated PKR823 billion (around $2.9 billion). The single largest contributor was profit transferred by the State Bank of Pakistan, which amounted to PKR2,428 billion (roughly $8.7 billion) and was paid in the first quarter.
Other sources included Rs8.8 billion from the Captive Power Plants levy, PKR25.5 billion from the carbon levy, PKR4.8 billion in profits from the Pakistan Telecommunication Authority, worth PKRRs61.1 billion in oil and gas royalties, PKR267 billion from passport fees, PKR32.3 billion from the natural gas development surcharge, and PKR17 billion from the Islamabad Capital Territory administration, along with smaller miscellaneous receipts.
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