Expect a record increase in the fuel price in Pakistan within days. The IMF is pushing the government to end energy subsidies to secure its next loan.
The International Monetary Fund (IMF) has sent a clear message to Pakistan. “It is time to end subsidies” As the government prepares the 2026-27 federal budget, the IMF is pushing for strict economic changes. These changes could lead to a massive jump in the cost of living, with experts predicting that fuel prices may reach as high as Rs. 535 per liter.
The End of Cheap Fuel?
During recent online meetings, the IMF told Pakistan’s Finance Division that fuel and electricity subsidies must stop in the next fiscal year (Finance Division, 2026). The lender wants the government to implement “market-based pricing” immediately. This means if global oil prices go up, the price at the pump must go up too, without any government help to keep it low.
Currently, the government is using a special formula to keep high-speed diesel (HSD) prices around Rs. 380, but the IMF is unhappy with these “distortions”. On May 1, 2026, petrol prices were already raised to Rs. 393.35. If the government removes all support and taxes increase as requested, diesel could easily cross the Rs. 525 mark, a price level already seen during peak crisis moments in April, 2026.
Expected Fuel Price in Pakistan (May–June 2026)
| Fuel Type | Current Price (May 5, 2026) | Expected Price Without Subsidies | Estimated Hike |
|---|---|---|---|
| Petrol (Super) | Rs. 399.86 | Rs. 458.40 – Rs. 475.00 | +Rs. 58.54 |
| High-Speed Diesel (HSD) | Rs. 399.58 | Rs. 520.35 – Rs. 535.00 | +Rs. 120.77 |
| Kerosene Oil | Rs. 360.76 | Rs. 410.00 – Rs. 425.00 | +Rs. 49.24 |
| Light Diesel Oil (LDO) | Rs. 287.54 | Rs. 340.00 – Rs. 355.00 | +Rs. 52.46 |
Electricity Prices to Rise in 2027
The news is similar for the power sector. While the IMF has allowed a temporary power subsidy of Rs. 830 billion for the next year, it comes with a heavy condition, a major electricity tariff hike in January 2027.
The goal is to stop the “circular debt”. The government has promised the IMF that it will recover the full cost of electricity from consumers.
Expanding the Tax Net
The IMF is also demanding that Pakistan collect more taxes. They want the tax-to-GDP ratio to increase to 11.3%, which would mean a record-breaking tax target of Rs. 15.6 trillion. To reach this, the government is being advised to:
- Remove tax exemptions for various business sectors.
- Bring retailers, real estate and agriculture into the tax net.
- Cut “non-development” government spending to save money.
What Happens Next?
The IMF Executive Board will meet on May 8, 2026, to decide on a $1.2 billion disbursement for Pakistan. If the government agrees to these tough budget conditions, the money will be released. However, for the average Pakistani, the coming months will likely bring higher bills and more expensive transport.
The final budget is expected to be presented to the National Assembly in June 2026.
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