Pakistan has formally assured the International Monetary Fund (IMF) that it will roll out a wide-ranging IMF climate reform agenda, linking development spending, energy use, disaster preparedness, and financial planning directly to climate resilience.
According to official documents, the government has committed to a 13-point reform framework under the IMF’s $1.3 billion Resilience and Sustainability Facility (RSF). These reforms come with clear targets to be achieved by 2027 and will apply across the federation and all provinces, the Ministry of Finance has confirmed.
A key pillar of the IMF climate reform agenda is strengthening disaster risk financing. Pakistan has assured the IMF that it will improve financial planning at both federal and provincial levels to better manage climate-driven emergencies such as floods, droughts, and heatwaves.
The goal is simple but critical: reduce sudden fiscal shocks that derail budgets and slow economic growth after natural disasters.
Climate checks mandatory for major projects
Under the new framework, climate impact assessments will become compulsory for all major development projects. Any public project costing more than Rs7.5 billion will now require a formal climate review before approval.
This step is aimed at ensuring climate resilience is built into public spending from the very beginning, rather than treated as an afterthought.
The documents reveal that at least 30% of total spending on infrastructure projects will be reserved for climate-related measures. These include adaptation, mitigation, and resilience-building components designed to protect long-term investments from environmental risks.
To improve transparency, Pakistan will introduce climate budgeting at federal and provincial levels. A dedicated climate budget report will be issued every year to track progress and spending.
Carbon levy on fuel, push for electric vehicles
As part of IMF conditions, Pakistan has agreed to impose an additional carbon levy of Rs5 per liter on petrol and diesel. The move is intended to discourage fossil fuel consumption while generating funds for climate initiatives.
At the same time, the government plans to promote clean transport. Subsidies will be offered for electric vehicles, with a target that 30% of new vehicles and 50% of motorcycles will be electric by 2030.
Electricity subsidies to be targeted
Pakistan has also assured the IMF that electricity subsidies will be limited to deserving consumers only. Subsidies for wealthy users will be phased out, while steps will be taken to curb line losses and electricity theft that continue to burden the power sector.
Energy labeling will become mandatory for appliances such as refrigerators, fans, LED lights, motors, and air conditioners. The government aims to actively promote energy-efficient appliances by June 2027 to ease pressure on the national grid.
The reform plan includes collecting service charges for efficient water use in Sindh, Khyber Pakhtunkhwa, and Balochistan. Irrigation revenues will be increased, and a new system for adjusting water rates will be introduced in Sindh and Punjab to improve sustainability in the water sector.
Under the agreement, banks will be required to conduct mandatory reviews of climate-related financial risks. Pakistan will also introduce green finance instruments and a national green taxonomy to guide sustainable investments.
