The International Monetary Fund (IMF) has called on Pakistan to eliminate subsidies on petroleum products and electricity in the forthcoming 2026–27 federal budget. This recommendation comes as part of ongoing virtual consultations between IMF officials and Pakistan’s Finance Division.
During the initial discussions, IMF representatives emphasized that subsidies on fuel and power should not be continued into the next fiscal year. They stressed that pricing adjustments proposed by regulatory authorities must be implemented promptly to ensure economic stability and transparency.
The IMF also reiterated the importance of minimizing financial support to the electricity sector. It urged the government to enforce tariff increases for both petroleum products and electricity without delay, aligning prices more closely with market realities.
In addition to subsidy reforms, the IMF has advised Pakistan to broaden its tax base and improve revenue collection. The government has been encouraged to raise the tax-to-GDP ratio by at least 1 percent, while significantly reducing tax exemptions across various sectors.
Furthermore, the lender recommended cutting non-development expenditures to ease fiscal pressures and strengthen public finances. These measures are seen as crucial steps toward achieving long-term economic sustainability.
Negotiations between Pakistan and the IMF are ongoing, particularly regarding fiscal targets and taxation policies for the upcoming financial year. As of now, no final decisions have been made on revenue goals or budgetary allocations.
