IMF 'asks' Pakistan to impose carbon levy on petrol, diesel

ISLAMABAD: Petrol and diesel are likely to get more costlier in the upcoming budget 2025-26 as the International Monetary Fund (IMF) has ‘asked’ Pakistan to slap a carbon levy on the petroleum products, ARY News reported on Monday, citing sources.

During the ongoing budget negotiations between Pakistan and the International Monetary Fund (IMF), the global lender has strongly pushed for the imposition of a carbon levy on petrol, diesel, and vehicles with internal combustion engines, sources revealed on Tuesday.

The IMF has proposed that if Pakistan opts not to implement the carbon levy directly on fuels, it must instead allocate an equivalent annual subsidy of Rs25 billion to support the promotion of electric transportation across the country.

The sources further said that the IMF has recommended that the federal budget introduce a carbon levy on vehicles with engine capacities exceeding 850cc, including both locally manufactured and imported petrol and diesel-powered cars.

It estimates that this move could generate up to Rs. 25 billion annually, which should be directed toward subsidizing electric motorcycles and rickshaws.

Additionally, the IMF has reportedly urged the government to eliminate all tax concessions on internal combustion engine vehicles, particularly those above 850cc.

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

To accelerate the country’s transition to clean mobility, the IMF has called for policy measures to ensure that, over the next five years, 50% of motorcycles and rickshaws in Pakistan are electric, and that electric vehicles (EVs) constitute at least 30% of all vehicles on the road.