ISLAMABAD: The International Monetary Fund (IMF) raised concerns over the proposed sales tax relief on electric vehicles (EVs) during talks with Pakistani officials on climate financing today.
The IMF delegation, which arrived in Pakistan earlier this week, rejected the sales tax exemptions included in the country’s electric vehicle policy.
According to sources, the IMF team opposed the sales tax relief on both electric vehicles and their parts, suggesting that the regular tax rate should be applied instead. The IMF also urged the Pakistani authorities not to offer any tax concessions on raw materials used in EV manufacturing, including the local sale of automobile spare parts.
The Ministry of Industries and Production had proposed sales tax relief to support the domestic manufacturing of electric vehicles, but the IMF emphasized that no additional tax relief should be provided for EVs in the future. The IMF’s stance is part of its broader effort to ensure fiscal discipline in Pakistan’s tax policies as part of the climate financing negotiations.
The third round of talks on climate financing is set to take place today, focusing on EV charging stations and the adjustment of tariffs by the Oil and Gas Regulatory Authority (OGRA). Pakistani officials will brief the IMF delegation on the progress of plans to establish 40 EV charging stations, with a target of 3,000 by 2030.
Further discussions will also cover budgetary gas subsidy reforms and green budgeting. Pakistan’s government is considering the imposition of a carbon levy for fiscal year 2025-26. The IMF is expected to propose measures to expand green budgeting and climate-related expenditures in the upcoming fiscal budget.
These climate finance talks, which will continue until February 28, aim to align Pakistan’s climate action plans with international standards and secure IMF support for climate-related initiatives.
