Policy Uncertainty Continues as Key Economic Decisions Stalled
The Shehbaz Sharif administration has once again postponed two critical policy decisions—whether dual nationals can hold top positions at the State Bank of Pakistan (SBP) and the implementation of a carbon levy to curb emissions.
SBP Appointments: Decision on Dual Nationals Delayed Again
For the third consecutive time, Prime Minister Shehbaz Sharif has deferred the ruling on whether dual nationals can serve as Governor, Deputy Governors, or Directors at the State Bank of Pakistan (SBP). This delay continues to create uncertainty around leadership at the country’s central bank.
Carbon Levy: No Consensus on New Fuel Tax
A separate meeting, chaired by Deputy Prime Minister Ishaq Dar, also failed to finalize the proposed carbon levy.
✔ Current Plan: The government is under pressure to raise the petroleum levy from Rs. 60 per liter to Rs. 70 per liter, the legal limit. This could help generate an additional Rs. 15 billion per month to address revenue shortfalls.
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✔ IMF Conditions: The International Monetary Fund (IMF) has suggested introducing a separate carbon levy, starting at Rs. 3 per liter and gradually increasing to Rs. 10 per liter over the next three years. This is part of Pakistan’s negotiations for a $1 billion Climate Resilience Facility.
✔ Dual Levy Plan: The government is now considering implementing both levies simultaneously to balance fiscal needs and environmental commitments.
Disagreements Over Revenue Allocation
The main dispute in Tuesday’s meeting revolved around how to allocate the funds from the carbon levy.
🔹 The climate change ministry wants the revenue to support climate mitigation projects.
🔹 An alternative proposal suggests using the funds to reduce the electricity bill sales tax from 18% to 10% to ease consumer burden.
European Union’s Carbon Tax and Its Impact on Exports
Another growing concern is the European Union’s Carbon Border Adjustment Mechanism (CBAM), which could affect Pakistani exports by imposing pricing measures on carbon-intensive goods. This could pose a significant challenge for industries relying on exports to the EU market.
Conclusion
With no final decisions made on either SBP appointments or the carbon levy, the Shehbaz Sharif government faces mounting pressure from international lenders, economic stakeholders, and climate advocates. The lack of policy clarity continues to raise concerns over Pakistan’s economic and environmental strategy.
