Why IMF urges Pakistan to end fuel subsidies immediately – details revealed
The International Monetary Fund said fuel support should be limited and targeted at deserving people.
According to the IMF statement, Pakistan will receive $1.21 billion after a staff-level agreement, subject to approval by the Fund’s Executive Board. The IMF said Pakistan made strong efforts to meet its economic targets.
Pakistan’s economic performance reviewed
The IMF said its programme helped improve economic stability in Pakistan and speed up the reform process. Pakistan’s economic growth stood at 4% from July to March 2026.
However, the IMF said growth was affected by the Middle East crisis and fell to 3.6%. Inflation reached its highest level in May 2026, while remittances helped keep the current account deficit under control.
Fuel support should be targeted
The IMF called for the gradual removal of the petrol subsidy scheme and warned against expanding subsidies further. It said any fuel support should only be provided to people who genuinely need it.
The Fund said the costly and broad fuel subsidy scheme should be ended immediately. If oil prices rise, any fuel support should remain limited, targeted and available only for a specific period.
Energy reforms and reserves stressed
The IMF also urged Pakistan to speed up energy sector reforms and improve the recovery of outstanding payments. It called for lower production costs, better collections in the gas sector and reduced losses.
The Fund advised the State Bank of Pakistan to maintain a sufficiently tight monetary policy to control inflation. Pakistan was also asked to increase its foreign exchange reserves.
The IMF’s latest recommendations put fuel subsidies and energy reforms at the centre of Pakistan’s economic programme. The main focus is on reducing costly support while directing assistance towards people who need it most.
The Fund also wants Pakistan to improve energy-sector recovery and reduce losses. Timely tariff adjustments and cost-cutting reforms are expected to remain important for the country’s economic stability.
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