Petroleum subsidy reforms have taken a major turn as Pakistan moves to withdraw petroleum subsidy under its ongoing agreement with the International Monetary Fund (IMF). Officials confirmed that the government will now limit broad subsidies and shift toward a more targeted support system.
The decision to withdraw petroleum subsidy comes as part of broader efforts to stabilize the economy and meet IMF conditions. Authorities said fuel prices will now be aligned with international market trends, ensuring regular adjustments instead of long-term subsidized rates. This step is aimed at reducing financial pressure on the national budget.
At the same time, the government clarified that petroleum subsidy withdrawal does not mean ending support for low-income groups. Instead, assistance will be redirected through programs like the Benazir Income Support Programme (BISP). Under the revised plan, quarterly stipends will increase from Rs14,500 to Rs19,500 starting January 2027 to help vulnerable families manage rising inflation.
Officials said the approach focuses on replacing blanket petroleum subsidy with targeted relief. This allows the government to use resources more efficiently while still protecting those most affected by economic challenges. The IMF has been informed that such subsidies will only be used in exceptional cases.
The economic team has also outlined spending controls to support the withdrawal of petroleum subsidy. These include reductions in fuel allowances for official use and cuts in non-salary expenditures. The savings generated from these measures are expected to strengthen fiscal stability and reduce unnecessary spending.
On the revenue side, petroleum levies continue to support the government’s financial position. With steady fuel consumption, levy collections have increased and are expected to exceed targets, helping offset gaps in tax revenue.
Officials also assured that no additional excise duty will be imposed on the fertilizer sector, a move intended to protect agriculture and maintain input costs for farmers. This balance between reform and sector support is part of the broader economic adjustment plan.
Alongside these changes, Pakistan is expanding its social safety net and introducing digital systems such as e-wallets for beneficiaries. These steps aim to improve transparency and ensure efficient distribution of financial assistance.
Overall, the withdrawal of petroleum subsidy reflects a shift toward long-term economic stability, targeted welfare support, and alignment with international financial commitments.