IMF presses Pakistan to phase out petrol subsidy scheme

The International Monetary Fund has asked Pakistan to phase out its fuel subsidy programme, saying any future assistance should be limited, targeted and time-bound.

An IMF spokesperson told Arab News that Pakistan had been asked to eliminate the support scheme gradually and to keep any such spending inside the FY2026-27 budget. ARY News carried the interview.

Pakistan introduced fuel subsidies in September for low-income motorcycle users. Motorcyclists and rickshaw drivers receive petrol vouchers worth Rs500 a week, and vehicles of up to 800cc get a discount of Rs100 per litre.

The fund considers the scheme's targeting too broad. Its call for withdrawal was written into the staff-level agreement reached on October 7, the spokesperson said.

Pakistan is implementing the reforms under a $7 billion IMF loan programme and has committed to aligning domestic petroleum product prices with international market rates.

The spokesperson said the conflict in the Middle East had become a major challenge for Pakistan, which relies heavily on Gulf countries for oil and gas imports. Higher international oil prices have fed into inflation, which the spokesperson put at 9.6 per cent in October, down from 10.3 per cent in September. Continued volatility in global crude prices could affect the country's economic outlook, the spokesperson said.

The IMF has pressed for macroeconomic stability alongside reform of state-owned enterprises and improvements in the energy sector. Its Executive Board is expected to meet in December, the spokesperson said.

ProPakistani also reported the demand, describing it as a call the fund had made again and naming motorcyclists and rickshaw drivers as the beneficiaries of the subsidy it wants removed.

The subsidy question sits inside a wider set of commitments Pakistan has given the fund, including the price alignment with international markets. Petrol and diesel prices in Pakistan are notified fortnightly by the government on the basis of OGRA's working, and any change to the voucher scheme would be felt at the pump by the same low-income riders the programme was designed for.

No figure was given for the cost of the scheme to the exchequer, or for how quickly the fund expects the vouchers to be withdrawn ahead of the December board meeting.