Prime Minister Shehbaz Sharif-led government is preparing to increase the levy on petrol and diesel by Rs 5 per liter as part of broader revenue-raising measures ahead of a staff-level agreement with the International Monetary Fund (IMF) for the next $1.2 billion tranche.

The IMF is set to announce a staff-level agreement in the coming days after sharing the draft Memorandum of Economic and Financial Policies with the Pakistani government.

Once consensus is reached, the Federal Finance Minister and the State Bank Governor will sign the agreement, paving the way for the release of the next tranche under Pakistan’s loan program.

Proposed tax

Sources revealed that the IMF has urged the government to increase both tax and non-tax revenues. Following the high-octane levy, the government plans to raise petrol and diesel taxes by Rs 5 per liter.

Additionally, Rs 100 billion has been cut from the development budget with IMF consultation. The IMF also objected to giving the government authority to appoint heads or CEOs of institutions, insisting that such powers remain with the respective boards.

Circular debt

A plan to control the circular debt in Pakistan’s power and gas sectors has been shared with the IMF. The fund is also reviewing the impact of rising oil and fertilizer prices, regional tensions, and the country’s overall financial conditions.

The government is preparing proposals to support the real estate sector, including potential reductions in property taxes on purchases and sales, subject to IMF approval.

To boost investment from overseas Pakistanis, the government plans to offer incentives in the real estate sector. A concessional scheme for the construction of affordable housing has already been approved.