Petroleum levy collection in Pakistan reached a record Rs1.567 trillion during fiscal year 2025-26, helping the government improve its overall fiscal position despite rising expenditure on defence and civil administration.
According to the Finance Ministry’s annual fiscal operations report, petroleum levy revenue rose 29 per cent from Rs1.22 trillion in the previous fiscal year. The collection also surpassed the original target of Rs1.468 trillion and the revised target of Rs1.498 trillion.
The record collection came amid historically high petroleum prices following the US-Israel attacks on Iran. The figure excludes customs duty and the Rs26 billion collected through the carbon levy.
For FY27, the government has set a petroleum levy target of Rs1.676 trillion. It also plans to raise an additional Rs50 billion through a climate levy on petroleum products.
Meanwhile, spending on the civil government increased 16 per cent to Rs1.033 trillion in FY26. This marked the first time the expenditure crossed the Rs1 trillion threshold despite restructuring and austerity measures.
Defence spending also rose 18 per cent to Rs2.588 trillion, compared with Rs2.194 trillion a year earlier. However, the expenditure remained close to the budgeted allocation of Rs2.55 trillion.
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Despite higher spending in several areas, Pakistan’s overall fiscal position improved significantly. The fiscal deficit narrowed to 2.6 per cent of GDP, the lowest level since FY03 among years with comparable data.
The primary surplus also reached a record 2.9 per cent of GDP, up from 2.4 per cent in FY25. Higher provincial surpluses and lower interest payments mainly drove the improvement.
Combined provincial cash surpluses increased 57 per cent to a record Rs1.45 trillion, compared with Rs921 billion a year earlier. Punjab contributed Rs915 billion, followed by Sindh with Rs350 billion, Khyber Pakhtunkhwa with Rs165 billion and Balochistan with Rs20.74 billion.
Interest payments also declined sharply to Rs6.947 trillion from Rs8.887 trillion in FY25. The reduction followed a significant fall in the policy rate from 22 per cent to 10 per cent.
Overall government expenditure fell to Rs23.09 trillion from Rs24.16 trillion. Similarly, subsidies declined by nearly 22 per cent to Rs1.01 trillion, while development spending fell to Rs727 billion from Rs786 billion.
Meanwhile, Federal Board of Revenue collections increased nearly 11 per cent to Rs13.01 trillion. However, the figure remained around 10 per cent below the government’s target.
The Finance Ministry also reported a record Rs853 billion statistical discrepancy, compared with Rs329 billion in the previous fiscal year. It attributed the gap to reporting delays, accounting adjustments and changes in commercial bank deposits at the federal and provincial levels.
