The International Monetary Fund (IMF) has asked Pakistan to end all subsidies on petroleum products and electricity in the upcoming 2026-27 federal budget. This strong demand came during initial virtual talks with the Ministry of Finance on May 5, 2026.
IMF officials told the government that fuel and power subsidies should not continue next year. They want immediate implementation of price increases approved by regulators like OGRA and NEPRA. The goal is to reduce the heavy burden on the national budget and control rising circular debt in the energy sector.
Subsidies on petrol, diesel, and electricity have become very costly for Pakistan. They create fiscal problems and benefit the rich more than the poor. The IMF also urged Pakistan to expand the tax base, increase the tax-to-GDP ratio by at least 1 percent, remove many tax exemptions, and cut non-development spending.
These steps are part of efforts to achieve better financial stability under Pakistan’s ongoing IMF program. The government faces a difficult choice. Removing subsidies may increase inflation and raise the cost of living for ordinary people, especially the poor and middle class. However, experts say keeping subsidies is not sustainable and adds to the country’s debt.
