Pakistan is anticipated to experience a significant decrease in non-tax revenue as profit transfers from the State Bank of Pakistan (SBP) to the federal government are predicted to decline by almost 41% in the fiscal year 2027. The SBP’s profit transfer is estimated to decrease to PKR 1.44 trillion in FY27 from PKR 2.43 trillion in FY26, marking a substantial drop of nearly PKR 1 trillion. This decline is attributed to easing inflation and lower interest rates affecting the central bank’s earnings.
The report highlights that the decline in profit transfers signifies the conclusion of a period where historically high policy interest rates allowed the central bank to generate significant earnings from its holdings of Pakistan Investment Bonds and Treasury bills, which greatly benefited government finances. As the SBP has reduced interest rates to bolster economic recovery, the yields on government securities have also decreased, leading to a notable reduction in the central bank’s income and its contribution to the federal exchequer.
According to Pakistan’s budget documents, receipts under civil administration and other government functions, primarily consisting of SBP profit transfers, are expected to decrease to PKR 1.48 trillion in FY27 from PKR 2.47 trillion in the previous fiscal year. This dwindling contribution comes at a time when Islamabad is grappling with escalating fiscal pressures, including high debt-servicing costs, development expenditures, and increased allocations for social welfare programs.
To counterbalance the projected decline in non-tax revenue, the government has set a target for the Federal Board of Revenue (FBR) to collect PKR 14.13 trillion in taxes during FY27, a significantly higher goal compared to the revised target for the current fiscal year. The decrease in SBP profit transfers is viewed as a normalization of monetary conditions rather than an economic downturn, as lower inflation and borrowing costs are reducing the central bank’s earnings while facilitating a broader economic revival, as per the report.
