Pakistan’s fuel subsidy programme is facing renewed pressure as the International Monetary Fund (IMF) calls for its gradual withdrawal. The lender wants the government to end the existing relief scheme for motorcyclists, rickshaw drivers and small car owners. It also insists that any future fuel assistance must remain limited, temporary and covered by the current fiscal year’s budget.
“The fuel support scheme should be phased out, given its broad targeting,” an IMF spokesperson said.
The IMF has further warned that Pakistan must avoid introducing additional fuel subsidies without a clear funding arrangement. Instead, any future relief should reach vulnerable households through established social assistance programmes.
Why the IMF Wants Pakistan to End the Fuel Subsidy
The IMF believes the current programme covers too broad a group of consumers. Therefore, it wants Pakistan to gradually withdraw the scheme rather than continue providing widespread fuel assistance.
Information Technology Minister Shaza Fatima played an important role in developing and implementing the Rs. 75 billion digital fuel subsidy programme. Last month, Prime Minister Shehbaz Sharif also announced that she would receive a Tamgha on March 23 for her contribution.
However, the IMF has maintained its position despite the government’s decision to extend the subsidy until December.
The lender has also outlined what Pakistan should do if international oil prices rise unexpectedly. In that situation, any additional relief should target vulnerable groups through existing social assistance programmes. Moreover, the government must accommodate the spending within the FY27 budget limits.
What the Fuel Subsidy Means for Motorists
Pakistan introduced the fuel assistance programme in September amid the US-Iran war and rising international oil prices. It provides different levels of support to motorcycle users, rickshaw drivers and owners of small cars.
Under the scheme, motorcycle and rickshaw users receive a weekly petrol token worth Rs. 500. Meanwhile, owners of cars with engines up to 800cc receive a discount of Rs. 100 per litre.
However, the discount applies to a maximum of 10 litres every 10 days.
The government recently extended the programme until December. Nevertheless, the IMF does not want the arrangement to continue beyond its intended period.
Petrol prices reached a record Rs. 458.41 per litre on April 3. Since then, prices have eased to around Rs. 330 per litre.
Under Pakistan’s IMF loan programme, the government has committed to aligning domestic fuel prices with international market rates. At the same time, it must protect the most vulnerable consumers.
$1.2 Billion Loan Awaits IMF Board Approval
The IMF has also highlighted the economic risks Pakistan faces from continued instability in the Middle East. The country relies heavily on Gulf oil and gas supplies, making international price fluctuations a significant concern.
Furthermore, prolonged volatility could place additional pressure on Pakistan’s economic outlook. Inflation reached 9.6 percent in October, compared with 10.3 percent in September.
Meanwhile, Pakistan’s latest staff-level agreement with the IMF remains subject to Executive Board approval. The board is expected to consider the agreement in December, provided Pakistan meets the programme requirements.
Once approved, the country will receive approximately $1 billion under the $7 billion Extended Fund Facility. It will also receive another $210 million through the Resilience and Sustainability Facility.
These disbursements would bring Pakistan’s total IMF funding received under the arrangements to approximately $5.7 billion.
For now, the government’s fuel relief programme faces an uncertain future as Pakistan balances public assistance with its commitments to the IMF.
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