IMF Urges Pakistan to Drop Costly Fuel Subsidies, Aid Only the Needy

In practice, the International Monetary Fund (IMF) has pressed Pakistan to limit petroleum subsidies to deserving residents, phase out costly fuel backing schemes and accelerate energy sector reforms to contain economic pressures.

Key points

• While remittances from overseas Pakistanis supported keep the current account deficit under control, inflation reached its highest level in May 2026.
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• The fund remarked the State Bank of Pakistan should maintain a sufficiently tight monetary policy to control inflation.
• The IMF additionally called on better recovery of outstanding payments in the energy sector, lower gas losses and measures to reduce production costs.
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In an official note, the fund additionally called on a cautious fiscal policy to control inflation and noted financial assistance during periods of rising oil costs should be targeted and temporary rather than extended through broad fuel subsidies.

Pakistan's economy grew by 4 percent between July 2025 and March 2026, but expansion is projected to slow to 3.6 percent due to the effects of the Middle East crisis, according to the statement. Direct Shipping to Europe Returns as Pakistan Restores Karachi Link.

For context, the IMF additionally called on better recovery of outstanding payments in the energy sector, lower gas losses and measures to reduce production costs. It remarked timely adjustments in energy costs and cost cutting reforms were necessary.

Meanwhile, the fund remarked the State Bank of Pakistan should maintain a sufficiently tight monetary policy to control inflation. It additionally called on Pakistan to take measures to growth its foreign exchange reserves. Grade-20 Officer Appointed as Senior Adviser to IMF Executive Director.

After the fourth review of the $7 billion Extended Fund Facility and the third review of the $1.4 billion Resilience and Sustainability Facility, paving the way for approximately $1.2 billion in further financing, subject to approval by the IMF Executive Board, pakistan and the International Monetary Fund (IMF) reached a staff-level agreement on October 8, 2026.

Meanwhile, the agreement is linked to broader structural reforms, including improving the governance, transparency and operational efficiency of state-owned enterprises (SOEs), advancing privatization, and reducing the government's role in commercial activities. Stay Connected with ProPakistani.

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