IMF recommends fuel price increase for cash purchases

ISLAMABAD: The International Monetary Fund (IMF) has proposed several tough measures to reform Pakistan’s fiscal policies ahead of the budget 2025-26.

According to sources, the IMF has demanded a Rs2 increase in petrol and diesel prices for cash buyers, while a Rs2 reduction has been demanded for transactions made through debit or credit cards to encourage digital payments.

The sources added that the IMF also proposed to increase sales tax on cash purchases from 18 to 20 percent in the budget 2025-26 to discourage the cash-based undocumented economy. The monetary fund also recommended a 2 percent reduction in sales tax on purchases made through debit or credit cards.

The IMF also called for the complete abolition of the non-filer category, a ban on the purchase of vehicles and property, the sources said, adding that it also urged non-tax filers to travel internationally.

The IMF proposed increasing the withholding tax on cash withdrawals by non-filers from 0.6 to 1.2 percent on amounts exceeding Rs 50,000.

The sources added that the IMF has recommended introducing a carbon levy in the federal budget on vehicles with an engine capacity of more than 850cc, including both locally manufactured and imported petrol and diesel cars.

It estimates that the move could generate revenue of up to Rs. 25 billion annually, which should be directed towards subsidizing electric motorcycles and rickshaws.

Furthermore, the IMF has reportedly urged the government to end all tax concessions on vehicles with internal combustion engines, especially those above 850cc.

It has specifically demanded that the sales tax on vehicles above 850cc be increased from the current 12.5% ​​to 18% in the upcoming budget.