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IMF Tax Demand Poses Risk to Pakistan’s Refinery Upgrade, Fuel Prices Could Spike
Pakistan’s refinery upgrade project faces hurdles as IMF demands 18% tax on petroleum imports. Petrol could rise by Rs 47/liter and diesel by Rs 50/liter if condition is accepted. Govt seeks tax exemption on machinery.
MH
by Muhammad Hashir
2025-12-12
IMF Tax Demand Poses Risk to Pakistan’s Refinery Upgrade, Fuel Prices Could Spike

Pakistan’s refinery upgrade project, aimed at producing higher-quality Euro 5 petroleum products, faces a potential setback as the International Monetary Fund (IMF) has refused to grant tax exemptions on imported machinery. Sources in the Ministry of Petroleum warned that if the IMF’s demand for an 18% tax is accepted, petrol prices could increase by Rs 47 per liter, and diesel prices could rise by Rs 50 per liter.

The IMF has proposed an 18% tax on petroleum products to recover costs, while the government has suggested a sales tax of up to 2% on these products. The IMF has yet to approve the government’s proposal.

Currently, no refineries in Pakistan are capable of producing Euro 5 standard fuel. Local refineries can only refine Euro 2 and Euro 3 category petrol and diesel. Under the refinery upgrade plan, refineries are expected to invest approximately $6 billion to enhance production quality and meet international standards.

The government has requested tax exemptions on machinery needed for the upgrade, highlighting the importance of maintaining affordability of fuel for consumers while modernizing the refining sector.

Industry experts warn that the refusal of tax exemptions could not only increase fuel costs for consumers but may also slow down Pakistan’s transition to cleaner, higher-quality petroleum products.

The refinery upgrade project is seen as a key step toward improving Pakistan’s energy infrastructure and reducing environmental impact from lower-grade fuels.
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IMF

PetrolPrices

PakistanOil

RefineryUpgrade
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