The Government of Pakistan has doubled the Climate Support Levy on petrol and high-speed diesel to Rs. 5 per liter, effective July 1, under fiscal measures introduced through the Finance Act 2026 and commitments tied to Pakistan’s agreement with the International Monetary Fund.
According to an official notification, the Climate Support Levy has been increased from Rs. 2.50 per liter to Rs. 5 per liter on both major fuels used across the country.
Petroleum Levy Reduced to Offset Impact
To prevent an immediate rise in fuel prices, the federal government simultaneously reduced the petroleum levy on petrol and high-speed diesel.
The petroleum levy on petrol has been lowered from Rs. 66.66 per liter to Rs. 64.14 per liter, while the levy on high-speed diesel has been reduced from Rs. 79.97 per liter to Rs. 70.04 per liter.
As a result, the overall retail prices of petrol and high-speed diesel remain unchanged despite the higher Climate Support Levy.
Shift in Tax Structure Rather Than New Burden
Officials said the adjustment represents a restructuring of fuel taxation rather than the imposition of an additional financial burden on consumers. Part of the Petroleum Levy has effectively been replaced by the Climate Support Levy, keeping the total tax impact stable at the pump.
This approach allows the government to redirect a portion of fuel-related revenue toward climate-focused financing without triggering public backlash through higher fuel prices.
Climate Financing Linked to IMF Commitments
The Climate Support Levy was introduced under the Finance Act 2026 as part of Pakistan’s broader fiscal reform agenda and climate financing strategy. The levy is intended to generate dedicated funds for climate resilience, adaptation, and mitigation projects.
The measure also aligns Pakistan’s tax framework with structural reforms agreed under its IMF program, which emphasizes revenue mobilization, fiscal transparency, and sustainable financing sources.
Fuel Prices Remain Unchanged for Consumers
Despite the reshuffle in fuel levies, consumers will not see any change in petrol or diesel prices as of July 1. The government confirmed that the increase in the Climate Support Levy has been fully neutralized through the reduction in the Petroleum Levy.
Economic analysts note that while the immediate consumer impact is neutral, the policy signals a longer-term shift toward climate-linked taxation within Pakistan’s fiscal system.
