Lower State Bank profits expected to cut federal non-tax revenue by nearly Rs1 trillion in the upcoming fiscal year
ISLAMABAD: The federal government has projected a sharp decline in profits transferred by the State Bank of Pakistan during fiscal year 2026-27, highlighting the potential impact on non-tax revenue collections and overall fiscal resources.
According to budget documents, the government expects SBP profits to fall to Rs1.44 trillion in FY2026-27, compared with Rs2.43 trillion estimated for the outgoing fiscal year 2025-26.
The projected decrease represents a decline of more than 40 per cent and is expected to significantly reduce one of the government’s largest sources of non-tax revenue.
SBP remains major contributor to non-tax revenue
Profits transferred by the State Bank of Pakistan have become an increasingly important component of federal revenues in recent years, helping the government finance expenditure and manage fiscal pressures.
Budget documents show that receipts from civil administration and other functions are expected to total Rs1.48 trillion in FY2026-27, down from Rs2.47 trillion in the current fiscal year.
The decline is primarily attributed to the anticipated reduction in SBP profits.
Economists note that central bank profits are influenced by monetary policy conditions, interest rates, returns on government securities and exchange-rate-related factors.
Lower revenue expected from civil administration receipts
The government’s revenue projections indicate that despite improvements in several administrative revenue streams, the sharp fall in SBP profits will outweigh those gains.
According to the budget estimates:
• General administration receipts are projected to increase to Rs5.89 billion from Rs5.18 billion.
• Defence services receipts are expected to rise to Rs31.47 billion from Rs28 billion.
• Law and order receipts are estimated at Rs4.09 billion compared with Rs3.35 billion in the current year.
• Social services receipts are projected at Rs1.34 billion, slightly lower than Rs1.55 billion recorded previously.
Despite these increases in certain categories, the overall revenue position is expected to weaken because of the substantial reduction in central bank profit transfers.
Impact on fiscal position
The projected fall in SBP profits comes at a time when the government faces rising expenditure commitments, including record debt-servicing obligations and increased spending requirements across various sectors.
Fiscal experts say lower non-tax revenues could increase pressure on authorities to boost tax collection, improve compliance and expand the tax base to compensate for the anticipated shortfall.
The government has assigned an ambitious revenue target to the Federal Board of Revenue for FY2026-27 as part of its broader fiscal consolidation strategy.
Monetary policy may influence earnings
Analysts believe the decline in SBP profits is partly linked to changes in the interest rate environment.
Following a period of exceptionally high policy rates, the central bank has gradually eased monetary conditions, which may affect the profitability generated from its holdings of government securities and other financial assets.
As a result, profit transfers to the federal government are expected to normalise after reaching unusually high levels in recent years.
The budget projections underscore the government’s continued reliance on both tax and non-tax revenues to manage fiscal challenges, while highlighting the importance of sustainable revenue mobilisation in maintaining long-term fiscal stability.
