Pakistan recorded its strongest fiscal performance in more than two decades in fiscal year 2026, with the fiscal deficit narrowing to 2.6% of gross domestic product and the primary surplus reaching a record 2.9% of GDP, according to government data.
The fiscal deficit fell from 7.9% of GDP in FY2022 to 2.6% in FY2026, an improvement of 5.2% over three years. The country also posted a primary surplus for the third consecutive year, with the FY26 surplus of 2.9% of GDP described as the highest in at least 26 years.
The improvement reflects a significant shift in Pakistan’s public finances, with stronger fiscal consolidation helping reduce pressure on government borrowing and debt.
Debt growth also fell to a 20-year low, while the debt-to-GDP ratio and interest burden declined, according to the government figures. The stronger fiscal position is expected to create greater fiscal space for development spending while supporting macroeconomic stability.
Pakistan’s fiscal performance has also received recognition from international rating agencies. S&P Global Ratings upgraded Pakistan’s sovereign rating to ‘B’ with a stable outlook, citing stronger fiscal consolidation and improving sovereign fundamentals.
The latest figures mark a sharp reversal from FY22, when Pakistan recorded a fiscal deficit of 7.9% of GDP and a primary deficit of 3.1%.
The government said the improvement in public finances could provide a stronger foundation for sustainable and inclusive economic growth, as lower fiscal pressures create room for development investment and improve the country’s ability to withstand economic shocks.