IMF says phase out fuel relief ‘promptly’

October 08, 2026 (MLN):  The International Monetary Fund (IMF) has told Pakistan to phase out its fuel support scheme “promptly”, citing its high cost and broad targeting, in the one passage of Wednesday’s staff-level statement that openly disagrees with government policy.

The Fund went further. Any future fuel support, should oil prices rise again, must be limited, time-bound, routed through existing social assistance programmes and absorbed within the FY27 budget.

The demand lands less than a month after the scheme began, and ten days after the petroleum minister said it could run for another 10 months for Rs400bn to Rs500bn.

We went back through the numbers the government has itself put on record. They explain the Fund’s impatience.

Prime Minister Shehbaz Sharif announced the scheme on 13 September, offering Rs100 a litre off petrol for motorcycles, rickshaws and cars up to 800cc. Two- and three-wheelers get the discount on 20 litres a month, small cars on 30. In the last days of September, the petroleum minister said more than six million people had registered and that spending was running at Rs35bn to Rs40bn a month.

Those two figures do not sit together. Six million motorcyclists drawing their full 20 litres would cost Rs12bn a month, a third of the stated bill. The arithmetic only works at 17.5 to 20 million bikes. The minister also said Pakistan has more than 25 million motorcycles around 20 years old, and at that number the cost is Rs50bn a month, or exactly the Rs500bn upper estimate over 10 months.

The budget line, in other words, assumes almost every older motorcycle in the country enrols. That is what the Fund means by broad targeting.

The scale is clearest at the pump. Petrol retails at Rs396.65 a litre after the latest revision, of which Rs114 is taxes and duties. The Rs100 discount cuts the price for an eligible rider by about a quarter, to Rs296.65, and hands back about 88% of the tax on that litre.

In aggregate, the government collected Rs1.567 trillion in petroleum levy in FY26, according to the finance ministry. A Rs400–500bn scheme over 10 months would equal roughly a quarter to a third of that full-year take.

This is the second fuel scheme of 2026. The first paid public transport operators, motorcyclists and farmers in biweekly tranches, and had disbursed four rounds by early June with two more scheduled. It was wound up once global prices fell and petrol dropped to Rs299 a litre.

The budget condition is the binding one. FY27 is anchored on an underlying primary surplus of 2.0% of GDP and must also lift health and education spending to 2.8% of GDP from 2.5%. The minister’s answer is that the government could cut its own expenditure to finance the scheme. He has not said which expenditure.

For markets, the choice has a cost either way. Ending the scheme raises pump prices for millions of households with inflation at about 10.3%. Keeping it puts the fiscal anchor, and Board approval of about $1.2bn in disbursements, in question.

The minister has said the subsidy could run until the war ends. The Fund has said promptly. The available data does not establish which side has moved.

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