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The International Monetary Fund (IMF) has renewed its call for Pakistan to phase out its fuel subsidy programme. It stressed that any future relief must remain temporary, targeted and within the current fiscal year’s budget.
An IMF spokesperson told Arab News that the existing programme should be phased out because of its broad coverage.
The spokesperson added that future assistance could be considered if international oil prices rise unexpectedly. However, the government should direct support towards deserving households through existing social protection programmes.
Any such assistance must also remain within the FY27 budget limits, the spokesperson said.
Pakistan introduced the fuel subsidy scheme in September. The programme aims to protect low-income motorists from rising petroleum prices amid the US-Iran war.
Under the scheme, motorcycle and rickshaw users receive weekly petrol vouchers worth Rs500 ($1.80). Meanwhile, owners of vehicles with engine capacities up to 800cc receive a discount of Rs100 ($0.36) per litre.
The discount applies to a maximum of 10 litres every 10 days.
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The IMF had also called for the programme’s early withdrawal last month. It cited the scheme’s high cost and broad coverage.
Pakistan is seeking to move from economic stabilisation towards sustainable growth under the IMF’s $7 billion Extended Fund Facility (EFF).
The IMF spokesperson said Pakistani authorities had committed to aligning domestic petroleum prices with international rates. The programme also requires protection for the most vulnerable sections of society.
Finance Minister Muhammad Aurangzeb, State Minister for Finance Bilal Azhar Kayani and Finance Adviser Khurram Schehzad did not respond to Arab News requests for comments.
Pakistan raised petroleum prices following the US-Israel war on Iran, which began in February, according to the report.
Petrol prices reached a record Rs458.41 per litre on April 3. They later declined to Rs330 per litre as regional tensions eased.
The IMF spokesperson described the Middle East conflict as a major challenge for Pakistan. The country relies heavily on oil and gas imports from Gulf states.
Disruptions to international shipping routes have increased economic concerns. These include disruptions around the strategically important Strait of Hormuz following Iran’s blockade.
The IMF official warned that higher global oil prices had already increased domestic inflationary pressures.
According to the Pakistan Bureau of Statistics, consumer prices rose by 9.6% in October. Inflation had reached 10.3% in the previous month.
The spokesperson cautioned that continued volatility in global markets could affect Pakistan’s economic outlook.
The IMF said Pakistan should prioritise macroeconomic stability and stronger public finances.
It also called for reforms to improve competition, productivity and economic competitiveness. Strengthening social protection and human capital should remain part of the government’s agenda.
The Fund further highlighted the need to reform state-owned enterprises. It also stressed better public service delivery and improvements in the energy sector’s financial viability.
Last month, the IMF reached a staff-level agreement with Pakistan. The agreement followed discussions with government officials in Karachi and Islamabad.
However, the Fund’s Executive Board must approve the agreement before disbursements can proceed.
After approval, Pakistan is expected to receive around $1 billion under the EFF programme. It is also expected to receive another $210 million through the Resilience and Sustainability Facility (RSF).
These payments would bring total disbursements under both programmes to approximately $5.7 billion.
The IMF spokesperson said the Executive Board was expected to consider Pakistan’s EFF and RSF reviews in December. The meeting would also cover the 2026 Article IV consultation.
The schedule remains subject to the fulfilment of programme requirements.
