IMF rejects Pakistan’s EV sales tax exemption proposal

ISLAMABAD: The International Monetary Fund (IMF) has declined Pakistan’s request for a sales tax exemption on electric vehicles (EVs), asserting that tax rates should adhere to established policies, as reported by Express News on Wednesday.

Sources indicate that the IMF raised concerns regarding the tax concessions proposed under Pakistan’s EV policy, specifically opposing the exemption for local sales of electric vehicle components. In an attempt to promote the adoption of EVs, the Ministry of Industries and Production had put forth a recommendation for the tax relief. However, the IMF countered this by advocating that sales tax on the raw materials used for EVs should not be waived.

Currently, Pakistan and the IMF are engaged in ongoing negotiations related to climate financing, with discussions having entered their third round. Future talks will also focus on the development of electric vehicle charging stations and adjustments to associated tariffs, with Pakistani authorities set to inform the IMF about the country’s ambition to establish 3,000 charging stations by the year 2030.

Additionally, a technical delegation from the IMF arrived in Islamabad on Monday to discuss climate financing and relevant policy measures with officials from Pakistan. The primary objective of the IMF team is to engage in dialogue with federal and provincial authorities to examine strategies for climate funding, including green budgeting and tracking mechanisms.

From solar to EVs: How China is overproducing green tech

This series of discussions, which will extend until February 28, aims to evaluate Pakistan’s advancements in climate adaptation and financial strategies. A significant agenda item includes the proposed implementation of a carbon levy within the federal budget for the 2025-26 fiscal year, for which the IMF will provide recommendations regarding its framework and execution.

Furthermore, the negotiations will encompass various topics such as subsidies, electric vehicles, and the broader expansion of green budgeting. Officials are anticipated to give briefings on Pakistan’s current climate initiatives as well as its future plans.

The visit from the IMF delegation is part of extensive efforts to synchronize Pakistan’s financial policies with global climate commitments, ensuring the implementation of sustainable economic reforms.