Government to deregulate sugar sector under IMF conditions, sources

ISLAMABAD: The federal government of Pakistan has decided to end its intervention in the sugar sector as part of the conditions agreed upon with the International Monetary Fund (IMF), ARY News reported, citing sources.

Proposals have been finalised to fully deregulate the sugar industry, with the government limiting its role to maintaining a buffer stock of 500,000 tonnes of sugar, according to sources within the Ministry of Industries and Production.

Beyond this buffer stock, the government of Pakistan will not intervene in pricing, procurement, or supply mechanisms, allowing the private sector to operate freely.

The final draft of the proposal, prepared in consultation with key stakeholders, is expected to be presented to the Prime Minister next week.

The Trading Corporation of Pakistan (TCP) will retain a stock equal to one month’s national consumption.

Meanwhile, all other sugar handling and trade will be managed by the private sector.

The draft suggests that if deregulation leads to price volatility, the Benazir Income Support Programme (BISP) subsidy budget could be increased to protect vulnerable consumers.

In the case of surplus production, sugar will be exported, an approach aimed at ensuring better prices for sugarcane farmers.

Government of Pakistan estimates indicate that by running sugar mills at 70 percent capacity instead of the current 50 percent, an additional 2.5 million tonnes of sugar can be produced.

The excess sugar, if exported, could generate up to $1.5 billion in foreign exchange, according to the draft proposal.

Also Read: IMF ‘objects’ to sugar import subsidy

Earlier, the International Monetary Fund (IMF) expressed reservations over Pakistan’s decision to offer tax exemptions and subsidies on imported sugar, warning that such measures could jeopardise the ongoing $7 billion loan program.

According to official sources, the IMF opposed the government’s plan to provide a subsidy of Rs55 per kilogram on imported sugar, which is expected to arrive in Pakistan at a cost of Rs249 per kg.

The international lender has also rejected the Pakistan government’s justification that the import falls under “food emergency” measures.