Pakistan and the International Monetary Fund (IMF) are engaged in discussions over climate financing and economic reforms, with the global lender objecting to proposed sales tax concessions on locally manufactured electric vehicle (EV) parts.

The third round of talks is set to take place today, covering key issues, including climate adaptation funding, tax reforms, and energy sector adjustments.

The Ministry of Industries and Production had earlier proposed tax exemptions on raw materials used for EV manufacturing. However, the IMF has urged that tax rates in the new EV policy should align with standard fiscal norms.

Sources privy to the discussions revealed that the IMF has explicitly opposed sales tax exemptions on the local supply and sale of EV parts, emphasizing that future tax relief measures for electric vehicles cannot be granted.

The global lender argues that allowing such concessions could impact revenue generation and fiscal discipline.

Additionally, the IMF delegation is expected to review energy efficiency reforms, power subsidy adjustments, and the tariff mechanism of the Oil and Gas Regulatory Authority (OGRA).

Discussions will also focus on Pakistan’s climate financing needs, particularly the allocation of at least 1% of GDP toward climate adaptation and resilience projects.

Meanwhile, site selection for 40 EV charging stations is under review, with authorities aiming to establish 3,000 stations by 2030. Officials are expected to brief the IMF team on the feasibility and funding aspects of these projects.

The ongoing negotiations are part of Pakistan’s request for an additional $1 billion in climate financing under the Resilience and Sustainability Facility (RSF), which the IMF will assess alongside its review of the country’s performance under the $7 billion Extended Fund Facility (EFF).

An IMF staff mission is expected to visit Pakistan in mid-March to finalize discussions on the RSF arrangement, while the government prepares necessary documentation for climate-related public investment assessments.