The International Monetary Fund (IMF) has asked Pakistan to discontinue subsidies on petroleum products and end electricity subsidies as part of ongoing consultations for the 2026-27 federal budget.
IMF representatives during their initial virtual consultation with the Finance Division said that fuel and electricity subsidies should not continue in the next fiscal year and that pricing adjustments recommended by regulators should be implemented without delay.
The lender has also urged the government to ensure that electricity sector subsidies are minimized while increases in petroleum and power tariffs proposed by regulators are enforced immediately.
The lender emphasized expanding Pakistan’s tax base. 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.
In addition, Pakistan has been asked to further cut non-development government expenditures to control fiscal pressures and support public finances.
Discussions between Pakistan and the IMF are continuing over fiscal targets for the next financial year, particularly regarding taxation measures. No final revenue or budgetary targets have yet to be agreed upon.
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