The International Monetary Fund (IMF) has urged Pakistan to promptly end its broad fuel support scheme, citing its high cost and lack of targeted assistance for vulnerable households.
The recommendation came after Pakistan and the IMF reached a staff-level agreement on the latest reviews of the country’s loan programmes. The agreement could unlock approximately $1.2 billion, subject to approval by the IMF Executive Board.
IMF Calls for Targeted Fuel Assistance
The Fund said any future fuel support should remain limited, temporary and directed toward deserving households. It recommended using established social assistance programmes rather than providing broad subsidies.
The IMF also stressed that any new relief measures must fit within Pakistan’s fiscal budget for the 2026-27 financial year.
The advice follows the government’s fuel support initiative, which aims to ease the impact of higher petroleum prices on consumers. However, the IMF considers broad-based assistance costly because it also benefits people who may not need financial support.
Pakistan Seeks to Protect Vulnerable Households
The IMF acknowledged progress in Pakistan’s social spending, noting that health and education expenditure rose from 2.2% of gross domestic product in FY2024 to 2.5% in FY2026.
The government has committed to increasing this share to 2.8% in FY2027. The Fund said targeted cash transfers and improved beneficiary coverage could strengthen support for low-income households.
Energy Reforms Remain a Priority
The IMF also called for timely energy tariff adjustments, lower production costs and reforms to reduce losses across the electricity and gas sectors. It urged Pakistan to maintain financial discipline while strengthening foreign exchange reserves and pursuing structural reforms.
The staff-level agreement still requires Executive Board approval before Pakistan can access the proposed funding.
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