Setback To Pakistan! IMF Opposes Sugar Subsidy Plan, Warns Of Risk To $7 Billion Loan Agreement

(MENAFN- Live Mint) Pakistan's recent move to provide tax exemptions and subsidies on imported sugar has received objections from the International Monetary Fund (IMF), which has cautioned that decision could undermine the ongoing $7 billion loan agreement with the global lender.

According to ARY News, which cited official sources, the IMF has opposed the federal government's plan to subsidise imported sugar by PKR 55 per kilogram, expected to arrive at a cost of PKR 249 per keg. The IMF dismissed Islamabad's argument that this qualifies as a "food emergency" response.

IMF's concerns over imported sugar

A key concern is that a large share of the imported sugar is likely to be consumed by industrial users rather than ordinary households, which the IMF views as inconsistent with the public interest and a breach of fiscal discipline.

The federal government is now re-evaluating its decision to grant full duty exemptions on the import of 500,000 metric tons of sugar – a move approved by the federal cabinet without prior consultation with the Ministry of Finance.

The Federal Board of Revenue (FBR) waived all duties and taxes on these imports, while the Trading Corporation of Pakistan (TCP) has issued a tender for 300,000 metric tons, with bids closing by July 18.

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Adding to the controversy, the Pakistan Sugar Mills Association (PSMA) informed the government that local mills have sufficient stock to meet national demand until November. The PSMA claimed it could supply 530,000 tons monthly and criticised the government for imposing a sales tax exceeding PKR 25 per kilogram on locally produced sugar.

Pakistan needs to revisit its sugar import strategy

The IMF's concerns have increased pressure on the government to revisit its sugar import strategy, which now faces objections from both the lender and domestic industry.

Amid these developments, the government and the sugar industry reached an agreement to reduce sugar prices, setting a new ex-mill rate of PKR 165 per kilogram, Dawn reported on Monday. The Ministry of National Food Security and Research described this as a "big relief" for the public.

Provincial governments will now be responsible for ensuring sugar availability at the reduced price. The ministry had been in talks with the PSMA to assess current supply, pricing trends, and future strategies.

Earlier government efforts failed to control market prices, which continued rising to PKR 200 per kilogram, prompting the recent price-cut agreement.

The deal followed the federal government's decision to import 350,000 metric tons of sugar, determined based on immediate market needs and expected demand in coming weeks.

The imported sugar will be premium quality and meet market standards. TCP will manage the import to ensure transparency, quality control, and government oversight.

To support this initiative, all duties and taxes on sugar imports have been removed to make sugar more affordable and reduce inflationary pressures, Dawn reported.

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