Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement on the release of a $1.21 billion loan tranche, with the government agreeing to immediately end its fuel subsidy scheme.
According to Express Tribune, the agreement followed negotiations led by IMF mission chief Iva Petrova, which were held in Karachi and Islamabad from September 23 to October 7, 2026. The talks covered Pakistan’s 2026 Article IV consultation, the fourth review under the Extended Fund Facility (EFF), and the third review under the Resilience and Sustainability Facility (RSF).
Petrova said the fuel support scheme should be discontinued immediately, describing it as costly and untargeted.
She said that if oil prices rise unexpectedly in the future, any fuel assistance should be limited, temporary and targeted through existing social protection programmes. Such support should also remain within the framework of the fiscal year 2027 budget.
Prime Minister Shehbaz Sharif had announced the three-month fuel relief scheme, offering a Rs100-per-litre discount on up to 20 litres of petrol per month for motorcycle riders and 30 litres for owners of vehicles with engines of up to 800cc.
The government had allocated Rs75 billion for the scheme. The prime minister had also met the IMF managing director in an effort to secure support for the initiative, but the Fund maintained its objections.
The IMF had previously raised concerns over the subsidy’s high cost and lack of targeted beneficiaries, while Pakistani officials had maintained that the scheme would continue for three months despite the objections.
Under the latest agreement, however, the government will now have to revise its policy and discontinue the fuel subsidy scheme as part of the commitments made to the IMF.
The government also assured the Fund that it would strengthen spending in the social protection and health sectors and improve the performance and governance of public institutions.