Shehbaz asks finance ministry, IMF to ease fuel levy burden amid price surge

Prime Minister Shehbaz Sharif has instructed the Finance Division to engage the International Monetary Fund (IMF) on revising the fuel levy structure in a bid to shield the public from another wave of price hikes at the pump.

According to officials familiar with the matter, the directive was issued on Tuesday amid a sharp rise in international oil prices driven by the ongoing war involving Iran. The premier wants any necessary adjustments in petrol and diesel prices to be absorbed, as far as possible, within the existing tax framework rather than passed directly on to consumers.

Currently, the government charges a levy of Rs100 per litre on petrol and Rs55 per litre on diesel, commitments that are tied to Pakistan’s IMF programme. At the same time, authorities have already spent around Rs129 billion on fuel subsidies to keep domestic prices relatively stable, a cost met by cutting development spending and diverting funds from other budgeted areas.

Officials say the squeeze from soaring global prices and limited fiscal space has left the government walking a tightrope between honouring IMF conditions and averting a fresh spike in inflation. One senior functionary, speaking on condition of anonymity, said the prime minister has made it clear that protecting lower- and middle-income households from the full impact of the external shock must remain a priority.

The Finance Division has now been tasked with drawing up a detailed proposal for discussions with the IMF on how to rationalise the levies without derailing the bailout programme. Options under review include recalibrating the timing and scale of levy collections so that sudden jumps in global oil benchmarks do not immediately translate into steep increases in local fuel prices.

The move comes as Pakistan’s economy faces renewed pressure from higher import costs, a fragile fiscal position and persistent inflation. Any understanding with the IMF on temporary flexibility over the fuel levy could help ease near-term price pressures, though officials caution that room for manoeuvre remains limited under the existing programme benchmarks.