Is there a possibility of a significant increase in petrol prices in Pakistan in the near future? It appears so based on media reports. Officials have hinted at raising the petroleum levy (PL) during discussions for a new loan installment. Currently, the government collects Rs. 60/liter PL on both petrol and diesel, a rate that was increased as per IMF demands in previous negotiations.

Petroleum Levy

Reports suggest that there is a possibility of increasing the PL to Rs. 100/liter from the current rate of Rs. 60/liter on the sale of major oil products. This proposal may be included in the Finance Bill 2025, with the levy hike replacing the imposition of General Sales Tax (GST) which is currently at 0%.

Economist Abdul Rehman tweeted about this development, stating: “Important conditions/policies discussed for next Pakistan IMF program. The petroleum levy limit is to be enhanced to Rs 100/liter instead of GST.”

GST Proposal

Earlier this month, reports indicated that the IMF has suggested increasing general sales tax (GST) from 0% to 18% on numerous items, including petroleum products. The IMF estimated that this GST rate adjustment could generate around Rs. 1,300 billion in revenue, contributing 1.3% to Pakistan’s GDP. However, the IMF did not assess the potential inflationary impact of this indirect taxation.

In summary, the government might raise PL on petroleum products or impose GST, leading to a new wave of inflation for the already burdened population. The prices of petrol and diesel directly impact inflation in Pakistan, as an increase in fuel prices results in a rise in the cost of everyday goods, affecting the average person’s daily life. The situation will become clearer once the discussions between Islamabad and the IMF are finalized.

What are your thoughts on the proposed new petroleum levy for petrol and diesel? Feel free to share your opinions in the comments section.