ISLAMABAD (The Thursday Times) — Pakistan should phase out the fuel subsidy scheme it launched in September, and any future help for motorists should be limited, timebound, and paid for within this year’s budget, the International Monetary Fund said on Saturday.
“In the context of the current review, as stated in the Oct. 7 staff-level agreement, the fuel support scheme should be phased out, given its broad targeting,” an IMF spokesperson said.
Any future fuel support, “should oil prices surprise on the upside,” should be “limited, timebound, targeted using established social assistance programs, and accommodated within the FY27 budget envelope,” the spokesperson added.
Under the scheme, motorcycle and rickshaw riders get a weekly petrol token worth Rs500, while owners of cars with engines of up to 800cc get Rs100 off each litre on up to 10 litres every 10 days. The government introduced it to shield lower-income motorists from fuel prices that climbed during the US–Iran war.
Petrol reached a record Rs458.41 a litre on April 3 and has since eased to Rs330, after the government cut it by Rs2 from Saturday.
Under the $7 billion Extended Fund Facility, the authorities have committed to let domestic fuel prices follow international rates while protecting the most vulnerable, the spokesperson said.
The Fund called the Middle East war “a significant headwind for Pakistan, given its reliance on oil and gas imports from the Gulf countries,” and said higher oil prices had already added to inflation pressures. “Sustained volatility could weigh on the economic outlook,” the spokesperson said. Consumer prices rose 9.6% year on year in October, down from 10.3% in September, according to the Pakistan Bureau of Statistics.
The IMF said Islamabad should stay focused on macroeconomic stability and on reforms to strengthen public finances, increase competition and productivity, widen the social safety net, overhaul state-owned enterprises, and make the energy sector viable.
The Fund and Pakistan reached a staff-level agreement on October 7. Once the Executive Board approves it, Pakistan will receive about $1 billion under the Extended Fund Facility and $210 million under the Resilience and Sustainability Facility, taking total disbursements to about $5.7 billion.
The board meeting on the reviews, together with the 2026 Article IV consultation, is expected in December, “subject to the fulfillment of program requirements,” the spokesperson said, without saying what those were.
