Sugar deregulation and EV tax exemptions

October 7, 2026

The latest demands from the International Monetary Fund (IMF) show once again that Pakistan’s economic problems cannot be solved through short-term fixes. The Fund is seeking deregulation of the sugar sector, an end to tax exemptions for electric vehicles (EVs), limits on the government’s fuel subsidy scheme and reforms in the energy sector. These demands may be difficult, but they also offer Pakistan an opportunity to correct long-standing weaknesses in economic policy.

The sugar sector is perhaps the clearest example of why reform is needed. For years, sugar policy has remained caught between government controls, provincial interests, farmers, millers and consumers. The result has often been uncertainty over prices, production, exports and imports. A properly regulated market does not mean leaving consumers helpless. It means creating clear rules, ensuring competition and preventing manipulation by powerful groups.

The objection from Sindh over provincial autonomy also needs serious attention. Economic reform cannot succeed if federal and provincial governments continue to work at cross-purposes. The Centre should engage the provinces and develop a policy that protects constitutional responsibilities while also creating a more transparent sugar market.

The IMF’s demand to withdraw EV tax exemptions deserves a different kind of debate. Pakistan needs cleaner transport and a modern automobile industry. EVs can help reduce fuel imports and pollution. Therefore, removing incentives without considering the wider benefits of electric mobility could slow an important transition. At the same time, tax policy should not create permanent advantages for selected industries. The government should gradually replace blanket exemptions with transparent and targeted incentives.

The proposed fuel subsidy raises another concern. Relief for low-income consumers can be justified at a time of high living costs. But subsidies are not a permanent solution. They should be targeted, temporary and transparent. If the government keeps expanding subsidies, the burden will eventually return to taxpayers.

The same principle applies to gas and electricity. Circular debt, inefficient distribution companies and weak pricing systems have consumed public resources for years. Privatisation alone will not solve these problems. Strong regulation, better management and accountability are equally important.

The government should therefore treat the IMF programme not simply as a condition to be completed, but as an opportunity to undertake reforms that successive governments have avoided.