ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have reached an agreement to reduce the country’s weighted average tariffs to 6 percent over the next five years, halving the current rate of 10.6 percent. This strategic move is designed to open Pakistan’s economy to greater foreign competition, making it the country with the lowest tariffs in South Asia.
The reduction is expected to have a direct impact on local car prices, which are expected to decrease as a result of lower import and related costs within the auto sector. The tariff cuts will take effect from July 2025, with the ultimate goal of achieving a 6 percent rate by 2030.
This new policy will be implemented under two key frameworks: the National Tariff Policy, which aims to reduce tariffs to 7.4 percent by 2030, and the Auto Industry Development and Export Policy (AIDEP), which will see even further reductions in the automobile sector. Excluding the automobile industry, the tariff will now be set at 7.4 percent, slightly higher than the previous target of 7.1 percent.
Notably, the policy will also bring about the complete elimination of additional customs duties, an 80 percent reduction in regulatory duties, and the withdrawal of several concessions under the Customs Act’s fifth schedule. Additionally, a 7 percent additional customs duty on certain goods will be removed, as will a 2 percent duty on zero-tariff slabs, starting in July this year.
While the IMF initially proposed reducing the weighted average tariff to 5 percent, the federal government has committed to a 6 percent target. The new tariff policy is expected to be approved by the federal cabinet before the end of June, with full implementation scheduled for the 2025-26 budget.
For the auto sector, all additional customs and regulatory duties are slated for elimination by 2030, with the maximum tariff for imports capped at 20 percent. The regulatory duties on vehicles will see significant reductions of 55-90 percent in the first year, followed by further cuts in the subsequent years. A new 6 percent customs duty slab will also be introduced, while existing duties on various slabs will be gradually reduced over time.
