IMF raises concerns over Pakistan’s tax waiver on sugar imports
The IMF has criticized Pakistan’s tax waiver on 500,000 MT sugar imports, calling it a violation of the \$7 billion bailout terms. The government slashed sales tax to 0.25% to curb record-high sugar prices. Despite finance ministry objections, a tender for 300,000 MT was issued. The IMF rejected the “food emergency” justification, raising concerns over program compliance.
The International Monetary Fund (IMF) has expressed concerns over Pakistan’s decision to waive taxes on the import of 500,000 metric tonnes of sugar, citing a breach of key commitments under the country’s $7 billion program. The IMF rejected the government’s justification of a food emergency for this move, The Express Tribune reported, citing sources.
The Federal Board of Revenue (FBR) had waived taxes on the import of sugar to mitigate the price impact caused by earlier sugar exports, which had exacerbated the local price surge. However, the IMF pointed out that this move violated Pakistan’s agreement to avoid preferential tax treatments, including exemptions and zero ratings, as outlined in the IMF program.
The waiver, which includes a reduction in sales tax from 21% to 0.25% and full exemption of duties, directly contradicts the commitments made by Pakistan to the IMF. The agreement explicitly prohibits granting tax amnesties or any preferential tax treatment, including exemptions on commodity imports.
The waiver comes as sugar prices in the country hit Rs200 per kilogram, the highest recorded price for sugar in Pakistan’s history. The IMF’s reaction to the government’s move has heightened tensions, especially as the government bypassed IMF consultation in its decision-making process.
Following the approval of the sugar import and tax waiver, concerns were raised within the Ministry of Finance, which reportedly disagreed with the move. The finance ministry had expressed its concerns to the Prime Minister’s Office, arguing that the tax exemptions violated the IMF agreement and could jeopardize the ongoing program.
Despite these objections, the government moved forward with issuing a tender for the import of 300,000 metric tonnes of sugar, with a deadline for bids set for July 18, 2025.
In addition to the tax waiver, the government has been under pressure due to the anticipated sugar shortfall of 535,000 metric tonnes by October-November 2025. Meanwhile, the government’s export of 765,000 metric tonnes of sugar last year has exacerbated the local price increase.
As the situation unfolds, the government is considering options to address the concerns, including backing out of the imports or withdrawing the tax waiver for private sector importers. However, no final decision has been reached.
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Source : Profit Pakistan Today
