Petrol to stay costly in Pakistan as IMF eyes PKR 100 per liter levy for FY27

Petrol prices in Pakistan are set to remain elevated next fiscal year, with the petroleum development levy (PDL) likely to rise to PKR 100 per litre under proposals from the International Monetary Fund.

The IMF has recommended an 18% increase in the petroleum levy target as budget negotiations with the government extended by two more days.

The PDL is a fixed charge on petroleum products and a key source of non-tax revenue for the federal government. Unlike general sales tax, it is not shared with the provinces.

The IMF mission, currently in Pakistan for budget talks, is likely to prolong its stay beyond the original schedule. Discussions were initially expected to conclude on Wednesday.

Most issues have reportedly been settled, while negotiations continue on a few remaining points. The federal budget announcement is expected on June 5.

What is Pakistan's tax collection target for FY27?

The Federal Board of Revenue's tax collection target for the next fiscal year is PKR 15.26 trillion. This includes a half-year target of PKR 7.02 trillion by December 2026.

The IMF has proposed PKR 430 billion in new taxation measures. Authorities also plan to generate an additional PKR 95 billion through tax audits.

An estimated PKR 50 billion in further recoveries is expected from the sugar, cement, tobacco, and fertilizer sectors.

What will provinces contribute to the budget?

The IMF has asked provinces to generate an additional PKR 430 billion in revenue.

They are also expected to provide a combined surplus of nearly PKR 2 trillion to the center.

Provincial revenues are projected to rise to PKR 1.95 trillion during the next fiscal year. Provincial development budgets may increase from PKR 2.1 trillion to PKR 2.5 trillion.

How much will Pakistan spend on development and defense?

The federal development programme for the next fiscal year is expected to receive around PKR 986 billion. Earlier estimates had put the figure closer to PKR 968 billion.

Defense spending is projected to increase from PKR 2.56 trillion to PKR 2.67 trillion in the upcoming fiscal year.

Debt servicing costs are expected to remain a major fiscal burden. Interest payments are projected to reach PKR 7.8 trillion next year, while external financing needs are estimated at $21.2 billion.

What are Pakistan's growth and inflation targets for FY27?

Economic growth for the next fiscal year is projected at 3.5%. Average inflation is forecast at 8.4%, according to sources.

The government and the IMF have reached a preliminary understanding to raise quarterly Benazir Income Support Programme payments. Payments would increase from PKR 14,500 to PKR 18,000.

What other conditions has the IMF set?

Conditions requiring biannual increases in gas and electricity tariffs remain intact, sources said. These keep upward pressure on energy costs for consumers and businesses.

The IMF has recommended against introducing new tax exemptions for special economic zones. It has proposed a gradual phase-out of incentives for special economic and technology zones by 2035.