ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement on a $1.21 billion loan tranche. To secure the agreement, the government agreed to immediately end the fuel subsidy scheme and assured the IMF that it would improve spending in the social and health sectors, as well as the performance and governance of government institutions.
According to a report the negotiations, led by IMF mission chief Iva Petrova, were held in Karachi and Islamabad from 23rd September to 7th October 2026. Discussions covered the 2026 Article IV consultation, the fourth review under the Extended Fund Facility and the third review under the Resilience and Sustainability Facility.
In a statement issued at the conclusion of the talks, Iva Petrova said the fuel support scheme should be discontinued immediately because it was costly and untargeted. She said that even if oil prices rise unexpectedly in the future, any fuel support should be limited, time-bound, targeted through pre-existing social protection programmes and kept within the framework of the fiscal year 2027 budget. It is reported that Prime Minister Shehbaz Sharif had announced the three-month scheme to provide a discount of Rs100 per litre on 20 litres of petrol per month for motorcycle riders and 30 litres for owners of vehicles with engines up to 800cc.
The government had allocated Rs75 billion for the purpose. The prime minister had also met the IMF managing director in an effort to persuade her on the matter, but was unsuccessful. Earlier, The Express Tribune reported that the IMF had strongly objected to the untargeted subsidy and its heavy cost, while government officials had insisted that the scheme would continue for three months despite the objections.
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