IMF Urges Pakistan to Phase Out Rs75 Billion Fuel Subsidy Programme

The International Monetary Fund has reiterated its call for Pakistan to phase out its petrol subsidy programme aimed at motorcyclists, rickshaw drivers and owners of small cars, cautioning that any future fuel relief must be narrowly targeted, time-limited and financed within the existing budget framework. An IMF spokesperson told Arab News that the scheme should be discontinued because of its broad coverage, noting that it reaches far more people than the vulnerable households it was designed to protect.

The programme, valued at roughly Rs75 billion, was developed as a digital fuel subsidy and launched in September against the backdrop of conflict between the United States and Iran. Under its terms, motorcycle and rickshaw users receive a weekly petrol token worth Rs500, while owners of cars up to 800cc get a discount of Rs100 per litre on up to 10 litres every ten days. The government recently extended the scheme until December, though the IMF has signalled it should not continue beyond that point.

The Fund has indicated that if oil prices rise sharply again, any fresh assistance should be channelled through established social welfare programmes and accommodated within the budget for the next fiscal year. It has also flagged the Middle East conflict as a significant risk for Pakistan, given the country's heavy reliance on oil and gas from the Gulf, warning that prolonged volatility in energy markets could weigh on the economic outlook.

Petrol prices reached a record Rs458.41 per litre on 3 April before easing to around Rs330. As part of its loan programme, Pakistan has committed to allowing domestic fuel prices to track international rates while shielding the most vulnerable segments of society. Inflation stood at 9.6 percent in October, down from 10.3 percent the previous month, according to the report.

The staff-level agreement reached last month still requires approval from the IMF's Executive Board, which is expected in December provided programme conditions are met. Once cleared, Pakistan is set to receive about $1 billion under the $7 billion Extended Fund Facility and $210 million under the Resilience and Sustainability Facility, bringing total disbursements to approximately $5.7 billion.