The IMF has urged Pakistan to immediately end its broad fuel subsidy scheme. The recommendation is part of measures aimed at improving economic stability.
The Fund also called for a phased withdrawal of existing fuel subsidies. It stressed that new subsidies should not be expanded.
The IMF issued the recommendations after completing its latest economic review with Pakistan. The review resulted in a staff-level agreement between both sides.
Under the agreement, Pakistan is set to receive around $1.21 billion. The disbursement still requires approval from the IMF Executive Board.
The Fund said Pakistan had made strong efforts to meet its economic programme targets. It added that the programme helped restore macroeconomic stability.
The programme has also supported structural reforms across the economy. However, the IMF highlighted several areas requiring further action.
The Fund said Pakistan’s economy grew by 4% between July and March 2026. However, the Middle East crisis affected the growth outlook.
The projected growth rate was reduced to 3.6%. Inflation reached its highest level in May 2026, according to the Fund.
Strong workers’ remittances helped keep the current account deficit under control. The IMF noted this as an important factor supporting external stability.
IMF Calls for Targeted Fuel Support
The IMF has specifically called for the immediate removal of the broad fuel subsidy scheme. It described the measure as costly and widely applicable.
The Fund recommended that any remaining fuel support should target eligible beneficiaries. It should also remain limited and temporary.
Any support introduced because of higher international oil prices should follow the same approach. The IMF does not want temporary measures to become permanent subsidies.
Energy Sector Reforms
The Fund also urged Pakistan to continue reforms in the energy sector. It called for better recovery of outstanding payments.
Pakistan was also advised to reduce production costs across the energy sector. Improving collections in the gas sector was another key recommendation.
The IMF further stressed the importance of reducing losses. It also called for timely adjustments to energy tariffs.
Such measures are intended to improve the financial position of the energy sector. They could also help reduce pressure on public finances.
Monetary Policy and Foreign Reserves
The IMF said the State Bank of Pakistan should maintain sufficiently tight monetary policy. The policy should help keep inflation within an appropriate range.
The Fund also called for stronger foreign exchange reserves. It highlighted energy reforms as important for maintaining economic stability.
Pakistan is continuing fiscal, monetary and structural reforms under its IMF-supported programme. The latest recommendations outline further steps for strengthening the economy.
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The expected $1.21 billion disbursement remains subject to Executive Board approval. Further progress will depend on Pakistan’s implementation of the agreed reforms.
