ISLAMABAD – The International Monetary Fund (IMF) has expressed serious reservations over Pakistan’s decision to waive all taxes on the import of 500,000 metric tonnes of sugar, terming it a clear breach of the $7 billion loan programme.
This comes as sugar prices hit an unprecedented Rs200 per kg, according to the latest inflation bulletin from the Pakistan Bureau of Statistics. Government insiders revealed that the IMF rejected Islamabad’s justification of a “food emergency,” despite the Federal Board of Revenue (FBR) formally writing to the Fund to defend the move.
The sugar shortage worsened after the government earlier allowed the export of 765,000 metric tonnes, a decision that significantly tightened domestic supply and triggered the current price spike.
Officials say the IMF’s reaction aligns with the finance ministry’s prior warning that such actions would violate written commitments, specifically promises not to give preferential tax treatment or engage in direct commodity purchases. The decision also bypassed the IMF entirely, fueling mistrust.
The federal cabinet had last week approved the tax-free sugar import in an attempt to stabilize prices. The waiver reduced the cumulative import taxes and duties to a nominal 0.25%, which was expected to lower sugar prices by about Rs82 per kg. Without the waiver, the landed cost of imported sugar would have been around Rs245 per kg.
The IMF programme documents explicitly prohibit new tax exemptions, amnesties, or preferential treatments. Yet the FBR issued notifications exempting all duties and slashing the sales tax rate from 21% to 0.25% for both private importers and the state-run Trading Corporation of Pakistan (TCP).
The move marks the first real test for IMF’s new Mission Chief to Pakistan, Eva Ghirmai, who now has to assess how the government’s unilateral decision affects the ongoing programme.
After the IMF’s strong response, officials are considering rolling back the tax waivers or cancelling TCP’s import plans altogether. The finance ministry has already raised objections with the Prime Minister’s Office, noting the cabinet approved the decision without the finance minister’s input.
Meanwhile, the Pakistan Sugar Mills Association (PSMA) has assured the government it can meet domestic needs by starting the crushing season early. However, a projected shortfall of 535,000 metric tonnes in October-November remains a concern.
The government’s earlier decision to allow sugar exports—shifting prices from under Rs140 to Rs200 per kg—has now come back to haunt it, putting it in direct conflict with IMF conditions.
