The International Monetary Fund has called on Pakistan’s government to overhaul its fuel subsidy policy, recommending that support be narrowly targeted toward low-income citizens rather than offered as a broad-based public benefit. According to sources familiar with ongoing negotiations, the IMF warned that continuing widespread subsidies on petroleum products could exacerbate the country’s fiscal challenges and strain an already fragile economy.
In detailed recommendations reported by ARY News, the global lender suggested that instead of reducing petrol prices across the board, the government should increase direct financial assistance through the Benazir Income Support Programme by Rs5,000. This targeted approach, IMF officials argue, would provide more effective relief to vulnerable households while containing government expenditure. The IMF has been a key financial partner for Pakistan through multiple economic support programs in recent years.
Sources indicate that in line with IMF recommendations, beneficiaries of the social safety net program are expected to receive Rs19,500 monthly beginning January 2027. The federal government has reportedly assured the IMF of increased funding for BISP, which serves as Pakistan’s primary social protection mechanism for impoverished families. This shift toward targeted cash transfers reflects a growing consensus among international financial institutions that direct assistance is more efficient than blanket subsidies.
Meanwhile, following negotiations with IMF officials, the government has temporarily deferred the imposition of Federal Excise Duty on fertilizers and agricultural inputs. This decision acknowledges the sensitivity of agricultural production costs in a country where food security remains a pressing concern. Officials believe that maintaining affordable agricultural inputs will help stabilize food prices while targeted cash transfers protect low-income households from inflation.
The IMF’s recommendations come amid global energy market volatility that complicates Pakistan’s economic planning. Oil prices recently surged nearly 7% following geopolitical tensions, highlighting the unpredictable nature of fuel costs that subsidy programs must address. Pakistan’s energy sector has faced significant challenges in recent years, with circular debt and import dependence creating persistent fiscal pressures.
As Pakistan navigates these complex economic waters, the IMF’s guidance emphasizes precision in social spending. By channeling resources specifically to those most in need, policymakers hope to achieve both social protection and fiscal sustainability—a delicate balance that will shape the country’s economic trajectory in the coming years.
Source: ARY News