The International Monetary Fund (IMF) has asked Pakistan to channel fuel relief through the country’s established social safety net as review talks for the IMF programme opened in Islamabad.
IMF mission chief Iva Petrova raised the issue during the opening meeting for the fourth review of Pakistan’s Extended Fund Facility (EFF) and the third review of the Resilience and Sustainability Facility (RSF).
Finance Minister Muhammad Aurangzeb participated in the meeting virtually.
IMF Examines Fuel Relief Mechanism
The government introduced a fuel compensation scheme to provide relief to consumers facing higher petrol and diesel prices driven by global market conditions and domestic taxation.
The government currently levies Rs110 per litre on petrol and Rs101 per litre on diesel, meaning the proposed relief does not take the form of a direct subsidy at the pump.
According to a senior official, the IMF did not reject the compensation scheme but stressed that any relief should be delivered through an established social protection mechanism, such as the Benazir Income Support Programme (BISP).
Millions Register for Fuel Compensation
The fuel compensation initiative has attracted millions of registrations.
By last Friday, around six million citizens had registered under the scheme. More than 6.2 million tokens had been generated, while approximately 4.8 million had been redeemed.
The government subsequently removed the five-litre limit that had applied to motorcycles, rickshaws and Qingqi vehicles following public feedback.
Prime Minister Shehbaz Sharif had also briefed IMF Managing Director Kristalina Georgieva on the impact of elevated fuel prices on low-income households.
IMF Flags Education and Health Spending Shortfalls
The IMF mission also raised concerns about Pakistan’s performance against social-sector spending targets.
During the last fiscal year, education and health-related outlays remained Rs370 billion below a target of nearly Rs3.5 trillion.
Petrova also sought an explanation for an Rs853 billion statistical discrepancy identified in federal and provincial accounts.
The government has indicated that it will provide additional information and documentation to clarify the difference in the reported figures.
Gas and Power Circular Debt Remain on IMF Agenda
Progress on reducing circular debt in the gas and power sectors was another issue highlighted during the discussions.
Gas-sector circular debt had reached Rs3.6 trillion by March, including Rs1.8 trillion in principal.
The gas sector has historically relied on cross-subsidies to protect residential consumers rather than providing support through direct budgetary allocations.
This structure has also limited the room available for reducing tariffs for industrial and commercial consumers.
IMF Calls for Faster SOE Reforms
The IMF mission also pressed for faster progress on reforms involving state-owned enterprises (SOEs).
Petrova called for further work on SOE reforms, including amendments to the laws governing state-owned enterprises.
The discussions form part of the broader programme review, which is assessing Pakistan’s fiscal position, structural reforms, social spending and measures aimed at strengthening economic resilience.
Government Highlights Jobs and Development
Planning Minister Ahsan Iqbal has said the programme should extend beyond fiscal indicators and place greater emphasis on employment, economic development and broader growth objectives.
The discussions with the IMF therefore cover both fiscal consolidation and structural measures intended to improve the functioning of Pakistan’s economy.
Fuel Relief and IMF Programme Under Review
The IMF’s position on targeted fuel relief reflects its broader focus on directing government support toward households through established social protection mechanisms.
As review talks continue, Pakistan is also expected to address outstanding issues involving social spending, the Rs853 billion statistical discrepancy, circular debt and state-owned enterprise reforms.
The outcome of the discussions will determine progress under both the Extended Fund Facility and the Resilience and Sustainability Facility.