ISLAMABAD (Kashmir English): The International Monetary Fund (IMF) requests Pakistan to end all petroleum product subsidies and all electricity subsidies during the current budget negotiations for the 2026-27 federal budget.
The Finance Division received initial virtual consultation from IMF representatives who stated that all fuel and electricity subsidies must end before the next fiscal year, while regulators must receive immediate implementation of their price changes.
The lender requires the government to decrease electricity sector subsidies, while all proposed petroleum and power tariff increases from regulators must be put into effect right away.
The lender required Pakistan to extend its tax system to reach more citizens. The government has been advised to increase the tax-to-GDP ratio by at least 1 percent, expand the tax base, and significantly reduce tax exemptions granted to different sectors.
Pakistan must reduce its non-development government spending to control fiscal pressures and maintain its public financial stability. Pakistan and the IMF continue their discussions about fiscal targets for the next financial year because they need to resolve their taxation measures.
The parties involved have not achieved agreement on any revenue or budgetary targets.
IMF agreement with Pakistan for $1.2bn tranche
The International Monetary Fund (IMF) on Friday announced that it had reached a staff-level agreement with Pakistan for the disbursement of about $1.2 billion tranche under the Extended Fund Facility and Resilience and Sustainability Facility.
In a statement, the IMF mission chief Iva Petrova said that a staff-level agreement was reached on the third review of the 37-month Extended Arrangement under the Extended Fund Facility (EFF) and the second review of the 28-month arrangement under the Resilience and Sustainability Facility (RSF).
It added that the staff-level agreement is subject to approval by the IMF Executive Board.
With an approval, Petrova said, Pakistan will have access to “about US$1.0 billion (SDR 760 million) under the EFF and about US$210 million (SDR 154 million) under the RSF, bringing total disbursements under the two arrangements to about US$4.5 billion.”
An IMF team, led by Iva Petrova, held talks with Pakistani officials in Karachi and Islamabad from February 25 to March 2, 2026, and virtually afterward.
“Supported by the EFF, ongoing policies have continued to strengthen the economy and rebuild market confidence,” the Fund said in a statement.
It added that economic activity had gained momentum, inflation and the current account had remained contained, and external buffers had continued to strengthen, although the conflict in the Middle East had clouded the outlook by raising the risk of volatile energy prices, tighter global financial conditions, higher inflation, and pressure on growth and the external account.
