IMF Raises Concerns Over Tax-Free Sugar Import, Citing Breach of $7 Billion Programme
The International Monetary Fund (IMF) has expressed serious concerns over Pakistan’s decision to import 500,000 metric tonnes of sugar tax-free, calling it a violation of written commitments under the ongoing $7 billion bailout programme.
The move comes as sugar prices surged to a record Rs200 per kilogram, according to the Pakistan Bureau of Statistics (PBS) in its latest inflation report. Government sources told The Express Tribune that Pakistan had attempted to justify the tax-free import by citing a national food emergency, but the IMF rejected this argument, despite a formal request submitted by the Federal Board of Revenue (FBR) on the government’s behalf.
The crisis has its roots in the government’s earlier decision to export 765,000 metric tonnes of sugar, which tightened domestic supply and triggered the price spike.
Sources indicated that the IMF’s strong response aligns with the Ministry of Finance’s prior warning that such decisions could derail the loan programme. The sugar import and tax waiver are seen as breaches of two key conditions of the IMF agreement: avoiding preferential tax treatment and unauthorised commodity procurement.
Neither the Finance Ministry, FBR, nor the IMF have officially commented. However, officials close to the matter confirmed that the IMF is upset over the government’s unilateral action and failure to consult the Fund before issuing the tax waivers and tender.
This situation is also the first major test for Eva Ghirmai, the newly appointed IMF Mission Chief for Pakistan, as trust between both sides is further strained.
Last week, the federal cabinet approved the import of 500,000 tonnes of sugar and waived nearly all applicable taxes and duties in an attempt to bring down prices. The estimated cost reduction from this move is Rs82 per kg, bringing the projected import price to Rs245 per kg before bidding. Final figures will be available once bids are received by July 18.
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Federal Minister for National Food Security Rana Tanveer Hussain confirmed that the cabinet approved the sugar import in response to what was termed a “food emergency”, with the aim of immediate price stabilisation.
Following this approval, the FBR issued three notifications to waive import duties and reduce the sales tax and withholding tax to a nominal 0.25%, applying to both private sector importers and the Trading Corporation of Pakistan (TCP)—a direct violation of IMF conditions.
One FBR notification read: “Pursuant to the Cabinet Decision, the withholding tax under Section 148 shall be collected at the rate of 0.25% on the commercial import of sugar up to 500,000 tonnes by the Commerce Division through TCP or the private sector.”
The sales tax rate was slashed from 21% to 0.25%, while all custom duties were eliminated. However, the IMF programme documentation clearly prohibits such measures, stating: “Do not grant tax amnesties, and do not issue any new preferential tax treatment, including exemptions, zero-rating, tax credits, accelerated depreciation allowances, or special rates.”
Additionally, Pakistan had previously committed to phasing out federal and provincial price-setting for agricultural commodities by the end of FY2025-26, yet the government has now bypassed that promise. The TCP has already issued a tender for 300,000 tonnes, with a deadline of July 18 for bid submission.