IMF Blocks Pakistan Auto Policy Over Electric Vehicle Taxes

The International Monetary Fund (IMF) has blocked a final agreement on Pakistan's draft Auto Policy 2026-31 during economic review talks in Islamabad. The IMF requested additional data and raised objections to the framework, specifically recommending that Pakistan scrap planned tax incentives for plug-in hybrid electric vehicles (PHEVs) and range-extended electric vehicles (REEVs). While the Pakistani government proposed a 1% sales tax for these categories, the IMF is pushing for the standard 18% General Sales Tax.

The proposed policy aims to reduce vehicle prices, increase exports to over $3 billion, and promote electric vehicle adoption. It also includes a plan to reduce customs duties on conventional vehicles by up to 80% over five years. Because of the IMF's objections, the policy must now receive formal approval from the lender before it can be presented to the federal cabinet.

These negotiations are taking place alongside reviews of a $7 billion Extended Fund Facility and a $1.4 billion Resilience and Sustainability Facility. A successful review of these programs could unlock approximately $1.2 billion in disbursements for Pakistan. The government intends to brief the Economic Coordination Committee and the federal cabinet on the IMF's concerns before finalizing the draft with local manufacturers and importers.