The Pakistani government has achieved 43% of its petroleum development levy (PDL) collection target set for the full financial year during the first six months, according to data from the Ministry of Finance.

However, collection could have been higher if not for slower economic activity and reduced industrial demand, which kept revenues subdued.

PDL collection during the first six months of the current fiscal year — July to November — amounted to PKR 549 billion as compared to PKR 473 billion in the same period last year, according to the data.

In FY24, net PDL collection was around PKR 1,019 billion while for FY25, the target was fixed at PKR 1,281 billion.

Despite room to increase the PDL rate from PKR 60 to PKR 70 per liter, the government remains cautious, as further hikes could fuel inflation. The Finance Bill for FY25 already approved a PKR 10 increase, but authorities are wary of the far-reaching economic repercussions of implementing it.

PDL collection is under pressure due to nominal growth in petroleum products consumption. In the six months ended Dec 31, overall sales were up by 4% to 9.41 million tons as compared to 9.07 million tons during the same period last year.

Sales were depressed because of higher petroleum product prices, smuggling, and slower economic growth.

A key contributor to non-tax revenue has been profits deposited by the State Bank of Pakistan (SBP), which amounted to PKR 2,500 billion in the first six months of FY25. This is a sharp rise compared to PKR 972 billion in the previous fiscal year, driven by higher interest rates, which remained at 22% during the period.

Dividend income from companies in which the government holds equity also provided a significant revenue boost. In six months of the current fiscal year, dividend income rose to PKR 97.48 billion compared to PKR 50.46 billion during July-Nov 2023.

The full-year target for dividend income is PKR 138.9 billion, revised from the original PKR 92 billion set in the previous budget cycle.

During the preceding year, high inflation and interest rates forced companies to disburse lesser amounts in shape of dividends to buffer cash flows to cover working capital needs.