The International Monetary Fund (IMF) has expressed concern over a significant breach of the $7 billion programme, specifically criticizing the government’s decision to import 500,000 metric tonnes of sugar with a tax waive, an action that violates prior written commitments.
The development came as sugar prices officially hit Rs200 per kilogram for the first time in the country’s history, according to the Pakistan Bureau of Statistics’ (PBS) inflation bulletin released last Friday. Government sources said that the International Monetary Fund (IMF) rejected Pakistan’s plea to allow tax-free sugar imports, which the government had argued were necessary due to a food emergency.
The Federal Board of Revenue (FBR) had written to the IMF on behalf of the government, requesting a policy change, but the request was not accepted.
The supply situation tightened due to the government’s earlier decision to export 765,000 metric tonnes of sugar.
Sources said the IMF’s reaction aligned with the finance ministry’s assessment, which had forewarned of the $7 billion programme being “detracted” by two breaches.
Pakistan is now in serious breach of the IMF programme after it violated written commitments not to grant preferential tax treatment or engage in commodity purchases.
The Ministry of Finance, FBR, and IMF did not officially comment on the development. However, officials involved said the IMF had taken exception to the government’s move to bypass it when deciding to import sugar, breaching two programme commitments.
This marks the first test for the new IMF Mission Chief to Pakistan, Eva Ghirmai, and how she handles the situation. The government bypassed the IMF and swiftly waived taxes and issued an import tender, a move likely to create further mistrust between both sides, said the sources.
Last week, the federal cabinet approved the import of 500,000 metric tonnes of sugar, waiving nearly all applicable import taxes to mitigate the negative impact of its earlier decision to allow sugar exports. The tax waiver was intended to reduce the imported sugar price by an estimated Rs82 per kilogram.
With all applicable duties and taxes, the import price is estimated at around Rs245 per kg, though the exact price will be known once the government receives bids by this Friday. Federal Minister for National Food Security and Research Rana Tanveer Hussain stated that, due to a food emergency, the federal cabinet approved the import of 500,000 metric tonnes of sugar to stabilise local prices with immediate effect.
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