MediumIV Macro Policy & Sovereign Debt29 September 2026, Tuesday
IMF asks Pakistan to target fuel relief at the poor only
IMF mission chief Iva Petrova asked Pakistan at an opening meeting on 29 September to target its fuel relief through BISP. On 30 September the government unveiled an action plan for the local currency bond market, a condition of the programme.
According to an Express Tribune report of 30 September, the opening meeting took place on the 7th day of talks and covers the 4th review of the Extended Fund Facility. Petrova asked that the government's universal fuel compensation plan be run through BISP, the Benazir Income Support Programme, a social safety net. She also stressed that spending on education and health came in 370 billion rupees below a target of about 3.5 trillion rupees last fiscal year. She asked how an 853 billion rupee statistical discrepancy between federal and provincial accounts would be closed.
According to a Dawn report of 30 September, the government published the same day its action plan for the local currency bond market, a structural benchmark under the IMF programme. The plan aims to let individuals buy and sell government securities on the stock exchange and to set up a repo market. Commercial banks hold 78% of government securities, which make up about 62% of banking system assets. If the talks end well, Pakistan will receive about $1.2 billion in late October or early November. According to Dawn, a levy of 114 rupees per litre applies to petrol and 100 rupees to diesel, and the new petrol price from 1 October is 387.40 rupees per litre.
Talay assessment
Bottom line
The IMF is not opposing Pakistan's fuel compensation, but it wants it moved onto the existing social safety net. That narrows the room to cushion the price pressure caused by the war. The banks' heavy load of government paper is also squeezing private-sector credit. The most likely path is that the government shifts the plan to BISP and secures the $1.2 billion tranche.
Likely effects
- Household budgetsNegativeWeeks
If relief is limited to those registered with BISP, some owners of motorcycles and small cars lose support, while the high fuel levy stays in place.
- Local debt marketPositive6 months+
Giving retail and foreign investors access to bonds could reduce the banks' 78% weight and open up room for credit to the private sector.
- External financingUncertain1–6 months
A tranche arriving in late October or early November would support reserves; a delay would increase pressure on the rupee and the stock market.
Possibilities, ranked
- 1Agreement through compliance60%
The government ties fuel relief to BISP and a staff-level agreement is signed.
Watch: An IMF announcement of a staff-level agreement on the 4th review
- 2Delayed agreement30%
Disputes over spending targets and the 853 billion rupee gap prolong the talks, and the tranche slips beyond November.
Watch: Reports that the mission has extended its talks
- 3Programme breaks down10%
The government insists on universal relief and the review is suspended.
Watch: New vehicle classes being added to the fuel relief plan
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Expected IMF tranche▲ $1.2 billion
- Banks' share of government paper▼ 78%
- Health and education spending gap▼ 370 billion rupees