The International Monetary Fund (IMF) has once again urged Pakistan to gradually phase out its petrol subsidy programme for motorcyclists, rickshaw drivers and small car owners, raising questions about the future of fuel relief for millions of motorists.
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An IMF spokesperson told Arab News that the existing fuel support scheme should be phased out because of its broad targeting.
The Fund has also stressed that any future fuel assistance, if international oil prices rise again, should be limited, time-bound and directed towards deserving households through established social protection programmes.
The IMF further wants any additional spending to remain within the approved budget for the ongoing fiscal year 2026–27.
The latest statement reiterates the position outlined in the staff-level agreement reached between Pakistan and the IMF on October 7, 2026.
What Pakistan’s petrol subsidy scheme offers
Pakistan introduced the digital fuel relief programme in September 2026 amid rising international oil prices and regional tensions involving the United States and Iran.
The government designed the scheme to provide financial relief to lower-income motorists affected by higher petrol prices.
Under the current arrangement:
- Motorcyclists and rickshaw users: Receive a weekly petrol token worth Rs500, with up to four tokens available each month.
- Owners of cars up to 800cc: Receive a discount of Rs100 per litre on up to 10 litres of petrol every 10 days.
- Monthly relief for small cars: Eligible owners can receive the discount on up to 30 litres of petrol across three 10-day periods.
The programme uses a digital system to manage registrations and distribute fuel relief. The federal government has allocated approximately Rs75 billion for the initiative, according to reports.
The government recently extended the scheme until December 2026. However, the IMF’s latest position indicates that it wants the programme phased out rather than continued as a broad-based fuel subsidy.
IMF wants future relief targeted at deserving households
The IMF has argued that Pakistan should avoid extending fuel subsidies to a wide category of consumers.
Instead, if international oil prices rise unexpectedly, the government should provide assistance through existing social protection programmes.
The Fund wants future support to meet three conditions:
- It should be limited and temporary.
- It should target vulnerable households through established social assistance systems.
- Its cost should be accommodated within the FY2026–27 budget.
This approach is intended to prevent additional pressure on government finances while ensuring that financial assistance reaches households most affected by rising fuel costs.
Petrol prices and inflation remain major concerns
Pakistan introduced the fuel relief programme after international oil prices increased amid the Middle East conflict.
According to the supplied figures, petrol reached a record Rs458.41 per litre on April 3, 2026, before declining to around Rs330 per litre.
The IMF has warned that continued instability in the Middle East remains a significant risk for Pakistan because of its dependence on imported oil and gas from the Gulf region.
Sustained volatility in international energy markets could increase import costs, put pressure on foreign exchange reserves and affect domestic inflation.
Inflation was reported at 9.6 per cent in October 2026, compared with 10.3 per cent in September, according to the figures cited in reports on the latest IMF position.
$1.2 billion IMF funding awaits Executive Board approval
The IMF’s latest position on fuel subsidies comes as Pakistan awaits approval of its recent staff-level agreement with the Fund.
On October 7, 2026, Pakistan and the IMF reached a staff-level agreement on the fourth review of the $7 billion Extended Fund Facility (EFF) and the third review of the Resilience and Sustainability Facility (RSF).
The agreement is subject to approval by the IMF Executive Board.
Following approval, Pakistan is expected to receive approximately:
- $1 billion under the Extended Fund Facility.
- $210 million under the Resilience and Sustainability Facility.
The combined disbursement of approximately $1.2 billion would take total payments under the two arrangements to around $5.7 billion.
The IMF’s latest statement indicates that the government will face continued pressure to manage fuel-related spending while protecting vulnerable consumers and meeting its fiscal commitments.
For motorcyclists, rickshaw drivers and small car owners, the future of the existing petrol subsidy will depend on the government’s decisions following the IMF’s repeated call for its withdrawal.
