IMF urges Pakistan to end petrol subsidy scheme

ISLAMABAD: The International Monetary Fund (IMF) has called on Pakistan to phase out its fuel subsidy programme, stressing that any future fuel assistance should be limited, targeted and time-bound.

In an interview with Arab News, an IMF spokesperson said Pakistan had been asked to gradually eliminate its fuel support scheme and ensure that any such assistance is accommodated within the FY2026-27 budget.

The spokesperson said Pakistan introduced fuel subsidies in September for low-income motorcycle users. Under the scheme, motorcycle and rickshaw users receive petrol vouchers worth Rs500 per week.



Vehicles with engine capacities of up to 800cc are also being provided a discount of Rs100 per litre, the spokesperson added.

The IMF said it had called for the withdrawal of fuel subsidies under the staff-level agreement reached on October 7, arguing that the existing subsidy programme had a broad targeting mechanism and should therefore be phased out.

Pakistan is implementing economic recovery measures under the IMF’s $7 billion loan programme, the spokesperson said.

The spokesperson added that Pakistan had committed to aligning domestic petroleum product prices with international market rates.

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The IMF spokesperson said the ongoing conflict in the Middle East had emerged as a major challenge for Pakistan, which relies heavily on Gulf countries for oil and gas imports.

Higher international oil prices have contributed to rising inflation in Pakistan, the spokesperson said.

Pakistan’s inflation stood at 9.6 per cent in October, compared with 10.3 per cent in September, according to the IMF spokesperson.

The spokesperson warned that continued volatility in global oil prices could affect the country’s economic outlook.

The IMF has emphasised the need for Pakistan to maintain macroeconomic stability, while also stressing the importance of reforms in state-owned enterprises and improvements in the energy sector.

The IMF Executive Board meeting is expected to take place in December, the spokesperson added.