IMF allows phased hike in fuel levy to Rs53/litre as 10MFY26 collection tops Rs1.33 trillion

Pakistan’s petroleum levy collection exceeded Rs1.330 trillion against an annual target of Rs1.468 trillion during July–April FY2025-26, while the International Monetary Fund (IMF) has allowed the government to implement the remaining Rs53 per litre increase in petroleum levy in two phases, as the Federal Board of Revenue (FBR) faces a Rs683 billion tax shortfall in the current fiscal year, The Express Tribune reported.

Under earlier arrangements, the full increase was to be passed on to consumers from May 1. However, Prime Minister Shehbaz Sharif directed his economic team to seek flexibility without affecting the approval of the $1.2 billion loan tranche expected on May 8.

Following the revised understanding, the government adjusted fuel levies, reintroducing around Rs29 per litre on diesel while reducing petrol levy by about Rs4 per litre to Rs103.5 per litre. These changes led to an increase in fuel prices.

Pakistan is required under its agreement with the IMF to maintain a petroleum levy of Rs80 per litre on petrol and diesel, although the current rate has already reached Rs107.4 per litre. 

Officials indicated that the remaining increase will be implemented in phases, with further adjustments likely next week regardless of international price movements.

The government is under pressure to raise levy collections to meet the agreed primary budget surplus target, as tax revenues remain below expectations. During July–April FY2025-26, petroleum levy collection exceeded Rs1.330 trillion against an annual target of Rs1.468 trillion.

In contrast, FBR’s net tax collection stood at Rs10.26 trillion during the same period, missing the revised target by Rs683 billion. The IMF has declined a request to reduce the annual target of Rs13.98 trillion.

Revenue growth during the ten-month period was 10.5%, below the pace required to meet the annual target. The FBR paid Rs499 billion in refunds, including Rs51 billion in April.

The IMF has also linked the completion of the third review and release of the $1.2 billion tranche to the recovery of Rs322 billion in pending court cases.

The government is relying on higher petroleum levy collections and reduced development spending to offset the revenue gap and meet fiscal targets agreed with the IMF.