The International Monetary Fund (IMF) has expressed serious concerns about Pakistan government’s decision to import 500,000 metric tons of sugar tax-free.

Sources indicate that this move is a clear violation of a $7 billion agreement, which included a written commitment not to provide tax exemptions or preferential treatment.

This development comes at a time when, according to the Pakistan Bureau of Statistics, the price of sugar has reached Rs200 per kilogram for the first time in the country’s history.

The government sought approval from the federal cabinet to import sugar in response to shortages, waiving all import taxes, which is expected to reduce the price by approximately Rs82 per kilogram.

The sources said that the government argued a food emergency exists in the country, but the IMF rejected this reason.

According to the sources, the Federal Board of Revenue (FBR) formally defended the decision to the IMF in a letter, but did not receive a positive response.

Under the agreement, Pakistan was obligated to refrain from granting any new tax exemptions or preferential benefits.

However, the government not only waived taxes without notifying the IMF but also initiated the tendering process for sugar imports through the Trading Corporation of Pakistan (TCP), which openly violates two points of the programme.

This crisis is proving to be the first major test for the new IMF mission chief, Eva J. Gloriana, and the alleged violation of the agreement could strain trust between the government and the IMF.

Sources from the Ministry of Finance have indicated that the summary for the tax exemption was approved by the cabinet without the finance minister’s consent, prompting the ministry to send a written objection to the Prime Minister’s Office.

The sources further state that the government is considering revising this decision, which may involve withdrawing TCP’s import or rescinding tax exemptions for the private sector, although no final decision has yet been made.

Meanwhile, Federal Minister for Food Rana Tanveer Hussain has met again with the Pakistan Sugar Mills Association, where mill owners assured that they could soon start the crushing season to meet local demand.

It is worth noting that the government had allowed the export of 765,000 metric tons of sugar a few months ago, resulting in local market prices rising from Rs140 per kilogram to Rs200.

Now, concerns are being raised about a potential shortage of 535,000 metric tons of sugar in October and November.

The government claims that the purpose of the sugar import is to control prices, but the IMF’s discontent could jeopardize the next tranche of the agreement.