Pakistan is considering increasing the petroleum levy on petrol and diesel by Rs5 per litre as part of efforts to boost revenues ahead of an expected staff-level agreement with the International Monetary Fund (IMF) for the release of the next $1.2 billion tranche under its ongoing loan programme, according to officials familiar with the discussions.
Sources said the IMF has urged the government to enhance both tax and non-tax revenues, with the proposed levy increase coming after a recent hike in charges on high-octane fuel. The Fund has also been taken into confidence regarding a Rs100 billion cut in the development budget as part of fiscal adjustment measures.
Officials said the IMF mission has shared a draft of the Memorandum of Economic and Financial Policies (MEFP) with the government. Following further consultations and consensus, the document is expected to be signed by the federal finance minister and the governor of the State Bank of Pakistan, paving the way for a staff-level agreement expected within the next few days.
Sources further said the IMF raised objections to proposals seeking to grant the government greater authority over the appointment of heads of state-owned institutions, maintaining that the power to appoint chief executives and institutional heads rests with their respective boards.
The government has also shared with the IMF a plan to contain circular debt in the power and gas sectors, while the Fund is reviewing the potential economic impact of regional tensions on Pakistan’s economy. Rising prices of oil and fertiliser, along with tightening fiscal conditions, were also discussed during the talks.
Meanwhile, proposals to provide relief to the real estate sector, including a possible reduction in taxes on property transactions, remain subject to IMF approval. The government is also considering incentives for overseas Pakistanis to encourage investment in the property market.
Separately, the government has already approved a subsidised housing scheme aimed at promoting the construction of affordable homes as part of efforts to support the sector and stimulate economic activity.
