Pakistan and IMF Agree to Reduce Average Tariff by 6% Over 5 Years to Boost Economy
Pakistan and the International Monetary Fund (IMF) have reached an agreement to reduce the country’s average tariff by 6% over the next five years. The primary goal of this initiative is to open up Pakistan’s economy to international competition.
This tariff reduction is expected to impact the local car prices, which will likely decrease due to a reduction in imports and related expenses in the auto sector. The reduction will begin in July of this year, with the tariffs set to be lowered starting in July 2025. The target is to achieve the 6% tariff rate by 2030.
The tariff reduction will occur under two main policies: the National Tariff Policy, which aims for a 7.4% tariff by 2030, and the Auto Industry Development and Export Policy (AIDEP), which will further reduce tariffs in the automobile sector.
Excluding the automobile sector, tariffs will be set at 7.4% instead of the previously fixed 7.1%. Other major changes include the complete removal of additional customs duties, an 80% reduction in regulatory duties, and the withdrawal of certain exemptions under the Fifth Schedule of the Customs Act.
The new policy will eliminate the 7% additional customs duty on specific items and the 2% duty on zero-tariff slabs, which will come into effect in July of this year. While the IMF initially proposed a 5% reduction in the weighted average tariff, the federal government has committed to achieving a 6% reduction.
The government plans to seek approval for the new tariff policy from the federal cabinet by the end of June, with full implementation expected in the 2025-26 budget.
By 2030, all additional customs duties and regulatory duties on the automobile sector will be abolished, and the maximum tariff on all imports will be capped at 20%. Regulatory duties on vehicles will be significantly reduced by 55-90% in the first year, with further reductions in the years to come. A new 6% customs duty slab will be introduced, with existing duties on various slabs to be reduced over the next few years.
