The International Monetary Fund is pressuring Pakistan to eliminate petroleum pricing distortions as a condition of its ongoing financial program [1].
This demand places Prime Minister Shehbaz Sharif in a difficult position as the government attempts to balance international loan requirements with the economic burden on citizens facing soaring fuel prices.
The IMF is calling for the immediate removal of pricing distortions [1]. To meet these conditions, reports indicate the government has imposed a levy of Rs 238 per MMBtu on captive power plants [2]. However, other reports suggest the IMF is demanding a different petroleum levy of Rs 80 [3].
These pricing adjustments follow a fuel-price crisis that peaked earlier this year. In March 2026, fuel prices reached record highs following a shock in the Strait of Hormuz [4]. By March 13, a government spokesperson said the administration was considering seeking flexibility from the IMF regarding the petroleum levy [5].
While the IMF continues to push for pricing reforms, it has reportedly accepted a subsidy limit of Rs 152 billion [1]. This limit represents a compromise between the lender's demand for market-driven pricing and the government's need to prevent total economic collapse.
Internal pressure on the administration has intensified. A Business Recorder editorial said that for Prime Minister Muhammad Shehbaz Sharif, the current crisis has defined his leadership over the past three weeks [6].
The government remains caught between the necessity of IMF funds to avoid default and the potential for public unrest if fuel costs continue to rise. The disparity in reported levy amounts, ranging from Rs 80 to Rs 238 per MMBtu, highlights the complexity of the current regulatory adjustments [2, 3].
“The International Monetary Fund (IMF) is building up pressure on Pakistan, asking it to eliminate distortions in petroleum pricing as soon as possible.”
The conflict between IMF mandates and domestic price stability underscores Pakistan's precarious fiscal position. By demanding the removal of subsidies and the implementation of levies, the IMF is pushing for a market-based economy to ensure long-term debt sustainability. However, because fuel costs are a primary driver of inflation, these reforms risk triggering widespread social instability, forcing the government to negotiate narrow subsidy limits to keep the economy functioning.
