Carbon Leverage: Pakistan's New Fiscal Path with IMF Aid

Pakistan is set for more taxes as a carbon levy is introduced following a USD 1.3 billion agreement with the International Monetary Fund (IMF). The deal includes gradual fiscal changes, such as increased water pricing, reduced trade tariffs, and electricity rate changes, aiming to boost economic stability.

Pakistan's citizens should prepare for new taxes with the introduction of a carbon levy, a result of a fresh USD 1.3 billion agreement with the International Monetary Fund (IMF) aiming to address climate change challenges, officials reported.

The agreement includes the release of a second tranche of USD 1 billion, which will support Pakistan's significant fiscal changes. The initiation of a carbon levy, increased water pricing, and a global trade opening for the automobile sector form the cornerstone of the deal, with implementations beginning in July 2025.

Officials revealed these financial adjustments as part of a larger strategy to boost economic stability, which also entails a reduction in energy subsidies and tighter development spending moving into future fiscal budgets.

(With inputs from agencies.)