IMF calls for immediate end to Pakistan's broad fuel subsidy scheme

The global lender said Pakistan had made strong efforts to achieve its economic targets, adding that the IMF programme had contributed to economic stability and accelerated the reform process. The statement said Pakistan’s economic growth stood at 4 percent from July to March 2026, while the Middle East crisis affected growth, bringing it down to 3.6 percent.

Inflation reached its highest level in May 2026, while remittances helped contain the current account deficit. The IMF called for the fuel subsidy scheme to be gradually phased out, saying subsidies should not be expanded further and should remain limited to deserving people.

It called for the immediate end of the costly and broadly distributed fuel scheme. The statement said fuel support in case of higher oil prices should remain limited, targeted and time-bound. The IMF also called for improvements in energy-sector reforms and recovery of outstanding dues, measures to reduce production costs, and better recoveries and lower losses in the gas sector.

The global lender urged the State Bank of Pakistan to maintain a sufficiently tight monetary policy to keep inflation within an appropriate range. It also called on Pakistan to increase its foreign exchange reserves, saying timely tariff adjustments and cost-reducing reforms in the energy sector were essential.