ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistani authorities to undertake comprehensive reforms in the sugar sector, including the removal of restrictions and licensing requirements at the growing and processing stages, the liberalization of trade, and the elimination of formal and informal price controls across the entire value chain.
In its staff report on the second review under the Extended Arrangement of the Extended Fund Facility (EFF), the IMF stated that the federal and provincial governments have pledged to agree upon—and the federal cabinet will adopt—a national policy for sugar market liberalization. The policy will include key recommendations on licensing, price controls, import and export permissions, zoning, and clear timelines for implementation.
The Fund noted that the continuous Structural Benchmark (SB) on avoiding tax exemptions was missed due to exemptions granted on sugar imports. However, this has been addressed through the authorities’ commitment to deregulate the sugar sector under a new end-June 2026 benchmark.
According to the report, the upcoming national sugar policy (new end-June 2026 SB) will serve as a crucial test of the authorities’ resolve to overcome resistance to reform. To prevent piecemeal measures that could entrench anti-competitive practices, core reforms must include removing restrictions and licensing requirements at the production and processing levels, liberalizing trade, and ending all forms of price controls across the value chain.
The IMF also clarified that temporary tax exemptions on sugar imports—implemented under strict quality controls—were a targeted response to supply shortages and should not be viewed as a reversal of tax reform or deregulation commitments. The Tax Policy Office is steering three medium-term reforms, and provincial revenue capacity is being strengthened through new agricultural income tax regimes and harmonized GST on services, supported by improved data sharing and compliance efforts.
The authorities assured the IMF that these measures will be implemented as contingency steps in case of revenue shortfalls. To avert a sugar shortage caused partly by low yields in the previous season, emergency imports were expedited through a state-owned enterprise (SOE) and exempted from duties and taxes. This led to the missing of the continuous SB on avoiding tax exemptions, though the government has pledged to proceed with deregulation.
The government also informed the Fund that it is completing a review—due by end-December 2025—of legislation governing interventions in commodity markets. A comprehensive report will be finalized with recommendations to strengthen competition policies and dismantle trade barriers to prevent market abuse and uncompetitive behavior.
Sector-Specific Reforms
Sugar: A significantly lower-than-normal yield and reduced sucrose content in the 2024–25 crop season resulted in a projected supply shortfall for FY26 Q2, prompting the emergency import of 300,000 metric tons of sugar via the public sector. To prevent such interventions in the future, a high-level committee is developing recommendations for full sugar market liberalization. A draft national policy will be proposed in consultation with the provinces by end-March 2026. The final national policy—covering licensing, price controls, import/export permissions, and zoning, with clear timelines—will be agreed upon by federal and provincial governments and adopted by the federal cabinet by end-June 2026 (new SB).
The guiding principles include: removal of zoning restrictions for sugarcane cultivation; elimination of government controls on the use and sale of sugarcane; and abolition of licensing requirements for new sugar mills; (ii) reduction of import duties and liberalization of exports; and (iii) the government will also eliminate price controls and prevent any formal or informal arrangements between industry groups to influence ex-mill prices.
Wheat: Building on the phase-out of federal and provincial price-setting and the discontinuation of public procurement operations, the government is preparing a National Wheat Policy to modernize the market while ensuring food security. An interim policy — already completed — will guide the upcoming wheat sowing season by end-November 2025. A long-term policy will be finalized by end-May 2026 through federal–provincial consultations to remove structural barriers to market development and price discovery.
The authorities believe that long-delayed reforms in the wheat and sugar markets will remove distortions and provide a clear market framework to encourage private-sector investment and innovation across the agriculture value chain. Strong governance mechanisms for strategic wheat reserves will ensure non-distortive procurement, with releases limited to emergencies declared by federal or provincial governments.
Copyright Business Recorder, 2025
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