Faraz Saeed

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This guide explains key terms including GDP inflation fiscal deficit debt servicing and revenue targets helping readers better understand the government's fiscal priorities and policies.

Budget 2026: Understanding key terms shaping Pakistan’s economy

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ISLAMABAD: Pakistan&rsquo;s fiscal deficit is projected to reach its lowest level in 21 years by the end of the 2025-26 financial year, while the country&rsquo;s trade deficit shrank by 39% in May 2026, signaling improved fiscal and external sector indicators ahead of the upcoming federal budget. According to estimates by Topline Securities, Pakistan is likely to post a fiscal deficit, or budget deficit, of 3.6% of its GDP in the financial year, the lowest level in more than two decades.&nbsp; The brokerage house attributed the improvement to the government&rsquo;s restrictive fiscal policy under the International Monetary Fund program, which has helped contain expenditure growth while supporting stronger tax and non-tax revenue collection.&nbsp; It noted that the IMF expects the fiscal year 2026-27 budget deficit to be even lower at 3.2% of GDP. <div class="fr-embed"><div class="twitter-tweet twitter-tweet-rendered" style="display: flex; max-width: 550px; width: 100%; margin-top: 10px; margin-bottom: 10px;"><iframe id="twitter-widget-0" scrolling="no" frameborder="0" allowfullscreen="true" style="position: static; visibility: visible; width: 550px; height: 873px; display: block; flex-grow: 1;" title="X Post" src="https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-0&features=eyJ0ZndfdGltZWxpbmVfbGlzdCI6eyJidWNrZXQiOltdLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2ZvbGxvd2VyX2NvdW50X3N1bnNldCI6eyJidWNrZXQiOnRydWUsInZlcnNpb24iOm51bGx9LCJ0ZndfdHdlZXRfZWRpdF9iYWNrZW5kIjp7ImJ1Y2tldCI6Im9uIiwidmVyc2lvbiI6bnVsbH0sInRmd19yZWZzcmNfc2Vzc2lvbiI6eyJidWNrZXQiOiJvbiIsInZlcnNpb24iOm51bGx9LCJ0ZndfZm9zbnJfc29mdF9pbnRlcnZlbnRpb25zX2VuYWJsZWQiOnsiYnVja2V0Ijoib24iLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X21peGVkX21lZGlhXzE1ODk3Ijp7ImJ1Y2tldCI6InRyZWF0bWVudCIsInZlcnNpb24iOm51bGx9LCJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X3Nob3dfYmlyZHdhdGNoX3Bpdm90c19lbmFibGVkIjp7ImJ1Y2tldCI6Im9uIiwidmVyc2lvbiI6bnVsbH0sInRmd19kdXBsaWNhdGVfc2NyaWJlc190b19zZXR0aW5ncyI6eyJidWNrZXQiOiJvbiIsInZlcnNpb24iOm51bGx9LCJ0ZndfdXNlX3Byb2ZpbGVfaW1hZ2Vfc2hhcGVfZW5hYmxlZCI6eyJidWNrZXQiOiJvbiIsInZlcnNpb24iOm51bGx9LCJ0ZndfdmlkZW9faGxzX2R5bmFtaWNfbWFuaWZlc3RzXzE1MDgyIjp7ImJ1Y2tldCI6InRydWVfYml0cmF0ZSIsInZlcnNpb24iOm51bGx9LCJ0ZndfbGVnYWN5X3RpbWVsaW5lX3N1bnNldCI6eyJidWNrZXQiOnRydWUsInZlcnNpb24iOm51bGx9LCJ0ZndfdHdlZXRfZWRpdF9mcm9udGVuZCI6eyJidWNrZXQiOiJvbiIsInZlcnNpb24iOm51bGx9fQ%3D%3D&frame=false&hideCard=false&hideThread=false&id=2062104290664362358&lang=en&origin=https%3A%2F%2Fmain.d1wrm1qseko1cp.amplifyapp.com%2Farticles%2F&sessionId=1b778a9a6857ea9843f3887e49ed13bd5b948e77&theme=light&widgetsVersion=6a3ad42b224df%3A1778106238597&width=550px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</iframe></div></div> The projected decline marks a significant turnaround from the large fiscal imbalances that have weighed on the economy in recent years and is being viewed as a key sign of macroeconomic stabilization. Experts believe that controlled government spending helped reduce the deficit, and tax and non-tax inflows supported fiscal consolidation.&nbsp; In addition, transfers of Rs2.4 trillion from the State Bank of Pakistan&#39;s profits helped boost federal finances and achieve the projected fiscal deficit target. According to the Ministry of Finance, the country&rsquo;s fiscal deficit narrowed by 0.7% points of GDP during the first nine months ending March 31, 2026. The primary surplus, which excludes interest payments on debt, stood at 3.2% of GDP during this period. The ministry&#39;s fiscal report showed that higher central bank profits, a 45% increase in Petroleum Development Levy collections of ₨1.2 trillion in the first nine months of the financial year 2026, and lower debt-servicing costs contributed to the government&#39;s fiscal performance. The report showed that savings of ₨1.495 trillion in domestic debt servicing were achieved compared with the corresponding period of FY25 due to cash management measures and the early retirement of ₨1.9 trillion in domestic debt. Reduced trade deficit&nbsp;Pakistan&rsquo;s trade deficit narrowed by 39% month-on-month in May, driven by a 10% increase in exports and a 22% decline in imports.<div class="fr-embed"><div class="twitter-tweet twitter-tweet-rendered" style="display: flex; max-width: 550px; width: 100%; margin-top: 10px; margin-bottom: 10px;"><iframe id="twitter-widget-2" scrolling="no" frameborder="0" allowfullscreen="true" style="position: static; visibility: visible; width: 550px; height: 698px; display: block; flex-grow: 1;" title="X Post" src="https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-2&features=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%3D%3D&frame=false&hideCard=false&hideThread=false&id=2062238705331687470&lang=en&origin=https%3A%2F%2Fmain.d1wrm1qseko1cp.amplifyapp.com%2Farticles%2F&sessionId=1b778a9a6857ea9843f3887e49ed13bd5b948e77&theme=light&widgetsVersion=6a3ad42b224df%3A1778106238597&width=550px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</iframe></div></div> Commenting on the latest trade figures, Prime Minister&rsquo;s Coordinator on Economy Khurram Schehzad described the development as &ldquo;a massive 39% reduction in trade deficit,&rdquo; noting that rising exports and falling imports had significantly reduced the trade gap.&nbsp; &ldquo;The national economy is moving toward sustainability and stability,&rdquo; he said in a statement on Thursday. Businessman and investor Adeel Afzal said that exports in May 2026 increased by 1.3% year-on-year and 9.6% month-on-month to $2.71 billion, while imports declined by 6.6% year-on-year and 21.5% month-on-month to $5.29 billion.&nbsp; &quot;As a result, the monthly trade deficit narrowed sharply by 39.4% to $2.58 billion from $4.26 billion a year earlier,&quot; said the businessman in a post on X. Economist Yousuf Nazar, in a post on X, noted that strong remittance inflows are expected to offset much of the gap. The latest figures suggest Pakistan&rsquo;s economy is gaining stability, though analysts say sustaining the progress will require continued fiscal discipline, export growth, and structural reforms.

Economy

Pakistan is likely to post a fiscal deficit of 3.6% of its GDP in the current financial year, the lowest level in more than two decades. 

Pakistan’s fiscal deficit set for 21-year low as trade deficit shrinks 39% in May

TOKYO: Prime Minister Sanae Takaichi&#39;s government backed on Wednesday $19 billion in additional spending to help Japanese households struggling with soaring everyday costs driven by the Iran war. The budget could reportedly be passed as soon as Friday in the legislature dominated by the ruling Liberal Democratic Party and allies of Takaichi, who previously said the money would go toward easing petrol, electricity and gas costs. The extra budget was &quot;decided&quot; at a cabinet meeting, the prime minister&#39;s office said on its website. Top government spokesman Minoru Kihara told reporters at a news conference the cabinet had allocated 3.1135 trillion yen ($19 billion). That includes 2.5 trillion yen for a newly established &quot;contingency reserve&quot; for the situation in the Middle East, he said. &quot;Amid ongoing uncertainty in the situation in the Middle East, we have formulated this budget from the standpoint of minimizing risk,&quot; Kihara said. He added that the budget would allow for &quot;robust financial readiness&quot; and that the government would closely monitor future price trends to ensure that the daily lives of the public and economic activity are not disrupted. In May, leading potato chip maker Calbee unveiled a new grey packaging for 14 product lines, swapping its signature orange-and-yellow packets, with local media attributing the move to an ink shortage linked to the Iran war. Takaichi said the government expects to secure a stable supply of oil until next spring. She added that alternative supplies of naphtha, an oil byproduct used in a wide range of industries, from outside the Middle East, have recovered to more than 80% of their previous levels. Japan&#39;s central bank hiked its inflation forecasts in April and cut its growth projections after the Iran war sent oil prices soaring. Kihara said the supplementary budget would be covered by deficit-financing bonds. However, total bond issuance will not rise, he added, as some debt authorized in the previous fiscal year will not be issued due to expected tax revenues, among other factors.

Sanae Takaichi - (Photo: Sanae Takaichi's X Account)

Asia

Japan approved a ¥3.1 trillion ($19 billion) supplementary budget, including a large Middle East contingency fund, to cushion households from Iran war-driven rises in fuel, electricity, and gas costs.

Japan's govt backs $19B to dampen Iran war impact

NEW DELHI: The UN peacekeeping chief warned Tuesday that the &quot;indispensable&quot; role played by peacekeepers was facing challenges due to budget cuts, as funding shortfalls translate into troop reductions. &quot;We do not have a choice but to implement these reductions, which are due to the partial non-payment by some states,&quot; Under-Secretary-General for Peace Operations Jean-Pierre Lacroix told representatives from 32 UN troop-contributing countries. &quot;The international community is divided,&quot; he said in New Delhi. &quot;As a result, the appetite for collective responses to crises is diminishing.&quot; Shortfall in budget&nbsp;UN officials said earlier this month there was 16&ndash;17% shortfall in the peacekeeping budget, largely linked to US aid cuts. As a result, a 25% troop reduction will be spread across nine of the 11 peacekeeping missions. The United States was expected to contribute $1.3 billion of the $5.4 billion budget for 2025-2026 peacekeeping operations. But it has told the United Nations it will only pay around half that amount, or $682 million, which includes $85 million for a new international anti-gang mission in Haiti that was not in the original budget. Slashed foreign aid&nbsp;President Donald Trump has long claimed that international institutions have taken advantage of the United States and has slashed foreign aid. Lacroix emphasized the achievements of peacekeepers over the decades. &quot;The list, as we know, is very long of countries which successfully reached stability with the support of peacekeeping,&quot; he said. &lsquo;Indispensable&rsquo; role&nbsp;&quot;They make the difference between life and death for hundreds of thousands of civilians. They monitor ceasefires. They help build national key capabilities. Their role is indispensable.&quot; Despite the budget cuts, the overall security landscape has &quot;deteriorated&quot;, he added, demanding more of the truncated force. &quot;We&#39;re facing emerging drivers of conflict such as the impact of climate change, the role of international global terrorism and... the negative aspect of digital technology.&quot;

Americas

UN officials said earlier this month there was 16–17% shortfall in the budget, largely linked to US cuts; as a result, 25% troop reduction will be spread across nine of the 11 peacekeeping missions.

Articles tagged with "Budget"

Budget 2026: Understanding key terms shaping Pakistan’s economy

Pakistan’s fiscal deficit set for 21-year low as trade deficit shrinks 39% in May

Japan's govt backs $19B to dampen Iran war impact

'Indispensable' peacekeeping operations threatened by cuts, UN warns