Pakistan's fuel subsidy scheme too broad, should be phased out: IMF
IMF says Pakistan's fuel subsidy scheme, started in September, should be phased out due to its wide scope and high costs.
Pakistan's fuel subsidy scheme, launched in September to shield low-income groups from rising fuel prices, should be phased out due to its broad scope and high costs, IMF spokesperson said.
The scheme provides 500 rupees worth of petrol tokens weekly to motorcycle and rickshaw users, and a 100-rupee discount per liter on up to 10 liters of petrol every 10 days for car owners with engines up to 800cc.
The IMF spokesperson said any future financial support should be limited to specific groups for a limited time if global oil prices rise more than expected, and its costs should be covered within the approved budget for the 2026-2027 fiscal year.
Pakistan has committed to keeping petroleum product prices in line with global market rates under a 7 billion dollar Extended Fund Facility (EFF) program, while taking steps to mitigate the impact on vulnerable classes.
The IMF warned that the ongoing Middle East conflict poses a significant challenge to Pakistan's economic situation, as the country relies on oil and gas imports from Gulf countries.
The country's inflation rate was 9.6 percent in October, down from 10.3 percent in September, according to the Pakistan Bureau of Statistics.
The IMF emphasized the need for Pakistan to maintain economic stability, improve public finances, and enhance competitiveness and productivity.
The IMF and Pakistan reached a staff-level agreement last month, which is pending approval from the IMF's Executive Board.
The IMF's push for subsidy reforms comes as Pakistan faces high inflation and economic challenges.
