ISLAMABAD, June 2, 2025: The International Monetary Fund (IMF) has reportedly demanded that Pakistan imposes a levy on petroleum products and vehicles that use them.
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This point is likely to be highlighted in the upcoming round of Budget FY2025-26 talks between the global lender and the federal government of Pakistan, expected to be held in two days.
According to sources, a final consensus could not be reached on important budget issues in the talks to be held on May 30, due to which it has been decided to continue the consultation.
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Sources said that various proposals related to the new target of tax collections, potential revenues, and budget deficit are being considered in the talks. Detailed discussions are also expected on measures to provide relief to the salaried class in the next phase, on which a strong possibility of an agreement is being expressed.
One of the main discussion points will surround the petroleum prices and levy. According to sources, an agreement has been reached in principle between the government and the IMF on imposing a carbon levy, but its rate is yet to be determined.
The IMF has reportedly demanded that a carbon levy of at least Rs. 25 billion be implemented for every year, on petrol and diesel, and vehicles that use these fuels. One off-shoot of this recommendation is to remove the concessions currently applicable on imported and locally manufactured cars. In principle, IMF wishes to make petrol and diesel more expensive, and make petrol and diesel engines less attractive for consumers.
Alternatively, if a carbon levy is not imposed, then annually Rs. 25 billion from the Petroleum Development Levy (PDL) should be allocated to subsidize electric transport. Both of these options align with the overall green transportation targets, set by the IMF for Pakistan. These targets include transitioning at least half of all two- and three-wheelers to electric vehicles, as well as raising the annual share of electric vehicle sales to at least 30%, within in the next five years.
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On the other hand, government sources have said that the budget is not only being prepared in accordance with the principles of fiscal discipline but also keeping in mind the balance between public relief and economic growth.
