IMF Agrees to Continue Petrol Subsidy Scheme on Condition of No New Beneficiaries; Staff-Level Agreement Expected This Week
ISLAMABAD: The talks between the government and the International Monetary Fund (IMF) have taken a serious turn for the worse, with the global lender agreeing to allow the government to go ahead with its petrol subsidy scheme, as long as no new users are upgraded.
The fourth economic review talks are underway, where the Pakistani government and the IMF mission are actively working to create the Memorandum of Economic and Financial Policies (MEFP). Fiscal talks are on parallel tracks with discussions between the IMF mission, the Ministry of Petroleum and the Power Division.
Key Highlights of the IMF Economic Review Talks
To approve the continuation of the petrol subsidy scheme by the Prime Minister, the IMF called for a stringent limit on those who can benefit from the subsidy. Further, the lender has asked to have the tax exemption on electric vehicles (EVs) provided under the national auto policy withdrawn.
In addition, the IMF has campaigned for the sugar industry to be deregulated with the provinces’ approval. But it was revealed that the sugar policy of the centre had become an encroachment on the provincial autonomy for which the Sindh province had raised its plight with an impasse on this issue.
In technical-level talks, the Federal Board of Revenue (FBR) has pledged to hit the target of tax revenues for the year and the IMF mission is pleased with the revenue figures for the period July to September. Additionally, Pakistan’s economic team pledged to launch a new National Finance Commission (NFC) award in December of 2026.
Staff-Level Agreement Outlook: Staff-level talks are now in final negotiations and a SLA is likely to be signed this week if policy differences are sorted out. The next tranche of the loan will finally rely on IMF Executive Board formal approval.