Pakistan’s central bank profit transfer to govt seen falling 41 pc: Report

New Delhi, June 27 (IANS) Pakistan is projected to face a sharp decline in one of its largest sources of non-tax revenue, with profit transfers from the State Bank of Pakistan (SBP) to the federal government expected to fall by nearly 41 per cent in FY27 as easing inflation and lower interest rates reduce the central bank’s earnings, according to a report.

According to an analysis by Pakistan Observer, the SBP’s profit transfer is estimated to decline to PKR 1.44 trillion in FY27 from PKR 2.43 trillion in FY26, a drop of almost PKR 1 trillion.

The report said the decline marks the end of an extraordinary period during which historically high policy interest rates enabled the central bank to generate record earnings from its holdings of Pakistan Investment Bonds and Treasury bills, providing a major boost to government finances.

With the SBP cutting interest rates to support economic recovery, yields on government securities have declined, significantly reducing the central bank’s income and, in turn, its contribution to the federal exchequer, it added.

According to Pakistan’s budget documents, receipts under civil administration and other government functions, which largely comprise SBP profit transfers, are projected to fall to PKR 1.48 trillion in FY27 from PKR 2.47 trillion in the outgoing fiscal year.

The report further noted that the shrinking contribution comes at a time when Islamabad continues to face mounting fiscal pressures, including high debt-servicing costs, development spending and increased allocations for social welfare programmes.

To offset the expected decline in non-tax revenue, the government has tasked the Federal Board of Revenue (FBR) with collecting PKR 14.13 trillion in taxes during FY27, substantially higher than the revised target for the current fiscal year.

The fall in SBP profit transfers reflects the normalisation of monetary conditions rather than a deterioration in the economy, as lower inflation and borrowing costs reduce the central bank’s earnings while supporting broader economic recovery, the report said.

–IANS

ag/