ISLAMABAD: Pakistani Prime Minister Shehbaz Sharif has asked the finance ministry to seek the removal of fuel levies from the International Monetary Fund to cushion consumers from rising oil prices driven by the Iran conflict, a senior member of Sharif’s cabinet said on Wednesday.
The move highlights Islamabad’s attempt to shield households from higher fuel costs while remaining bound by conditions under its $7 billion IMF bailout program, which limits subsidies and requires fiscal discipline.
Pakistan currently imposes petroleum levies of around Rs100 ($0.36) per liter on petrol and Rs55 ($0.20) per liter on diesel, a key source of government revenue under its IMF-supported reform framework.
“Prime Minister Shehbaz Sharif has directed the finance ministry to engage with the IMF on removing petroleum levies, aiming to provide relief of up to Rs100 ($0.36) per liter on petrol and Rs55 ($0.20) per liter on diesel to consumers,” a senior member of Sharif’s cabinet told Arab News, declining to be named as he was not authorized to discuss the proposal with the media.
He added that the government had already spent about Rs130 billion ($466 million) to stabilize fuel prices but warned that further increases may be unavoidable as consumption rises.
He said Sharif wanted the matter taken up with the IMF so that any required adjustment in petroleum prices could be offset through existing levies.
“The government is trying hard to shield the population from the devastating economic impact of Middle East crisis,” the cabinet member added.
A finance ministry official, speaking on condition of anonymity, said it was unlikely the IMF would agree to changes in the levy structure, noting the lender has already asked Pakistan to limit fuel-related subsidies to under Rs150 billion ($540 million).
Spokespeople from the prime minister’s office, finance ministry and the IMF did not respond to requests for comment.
Last week, Pakistan and the IMF reached a staff-level agreement on the third review of the 37-month Extended Fund Facility, approved in September 2024, which is critical to stabilizing the country’s fragile economy.
Pakistan is among countries facing economic fallout from the conflict involving the United States, Israel and Iran, which has disrupted global energy markets and pushed oil prices higher.
The government raised petrol and diesel prices by Rs55 ($0.20) per liter last month but has since held off further increases by absorbing costs through subsidies.
Pakistan has also introduced a range of fuel conservation measures in recent weeks, including reducing fuel quotas for government vehicles and shifting some public sector activity to limit energy use.
The discussions with the IMF come as Pakistan also explores targeted relief measures to protect lower-income households from rising fuel costs. The government has been working on a framework to provide subsidies to vulnerable segments through digital and income-based mechanisms, as it seeks to balance fiscal constraints with growing public pressure over inflation.
