Tag: IMF

The government plans to reduce power sector subsidies by 20% in the FY2026–27 federal budget, bringing the total allocation to Rs 830 billion. This move, which aligns with IMF requirements to cap subsidies at 0.6% of GDP, aims to manage circular debt and improve sector efficiency. While overall subsidies are declining, allocations for K-Electric are projected to rise significantly, and the government is shifting its strategy toward targeted cash transfers for low-income consumers via the Benazir Income Support Programme (BISP) rather than broad cross-subsidies.

The IMF Executive Board is scheduled to meet on May 8 to approve a $1.2 billion disbursement to Pakistan, following successful program reviews. This total includes $1 billion from the Extended Fund Facility (EFF) and $210 million from the Resilience and Sustainability Facility (RSF). While Pakistan has made significant progress in stabilizing its economy and meeting petroleum levy targets, the Fund continues to emphasize the need for phasing out fuel subsidies and broadening the tax base through digital reforms. The approval will bring total IMF disbursements under current arrangements to roughly $4.5 billion, providing a crucial boost to the country's foreign exchange reserves amidst global market volatility.

The International Monetary Fund (IMF) has urged Pakistan to immediately eliminate "petroleum pricing distortions," specifically targeting the practice of using high petrol levies to cross-subsidize zero-rated diesel during the current harvest season. While the Fund has tacitly accepted a PKR 152 billion subsidy cap to shield consumers from global price spikes caused by the Strait of Hormuz conflict, it remains staunchly opposed to broad-based relief and is pushing for a transition to purely targeted support. As the government navigates a narrowing fiscal cushion following recent petrol price cuts and rising PKR 129 billion industry claims, the IMF is demanding a total overhaul of the macroeconomic framework ahead of the 2026–27 federal budget to ensure market-based energy pricing.

Pakistan's forex reserves have recovered significantly, but stability remains managed by external support (IMF, rollovers), not secured by self-sufficiency. The economy faces huge continuous strain from debt servicing (around $22B annually) and a large trade deficit ($35B projected). Stagnant exports and reliance on imports keep the situation vulnerable. To secure stability, Pakistan must prioritize structural reforms focused on reducing import dependency and aggressively boosting exports and remittances. The current calm is only a temporary "base camp."

Pakistan is facing a dollar shortage, a problem worsened by the recent floods that have disrupted the foreign exchange market. The scarcity of dollars could jeopardize the rupee's recent winning streak, as banks and exchange outlets have been submerged. While the shortage is expected to be temporary, analysts warn it could strain the country's foreign exchange reserves and hinder imports. Despite a recent upgrade and rising remittances, a survey indicates that nearly half of market participants expect the rupee to weaken to 285-290 per dollar by year-end.

In a significant victory for consumers and the environment, a National Assembly panel has unanimously rejected the proposed 18% sales tax on solar panel imports. Furthermore, the government has confirmed it will withdraw the controversial tax increase on hybrid vehicles. This pivotal decision rolls back two highly debated budget measures, offering relief and renewed optimism for sustainable solutions in Pakistan.

Pakistan’s banks are setting global records, just not the kind we want. Government bonds and loans now comprise 60 percent of our banking sector’s assets, […]

ISLAMABAD: The government has decided to immediately abolish the 3% Federal Excise Duty (FED) previously charged on the first sale of all properties in Pakistan […]

ISLAMABAD: The International Monetary Fund (IMF) has firmly rejected the Federal Board of Revenue’s (FBR) request to reduce property taxes and related transaction levies for […]