Pakistan to reduce tariffs by 43% over five years

Pakistan and the International Monetary Fund (IMF) have reached an agreement to reduce tariffs as part of an economic liberalisation plan. The average tariffs will drop by 43% over the next five years, leading to a weighted average of around 6%. This would make Pakistan's tariffs the lowest in South Asia, significantly improving competition with foreign industries. Currently, Pakistan has average tariffs of 10.6%. The new plan aims to implement this reduction starting in July. The changes will be carried out under two main policies: the National Tariff Policy and the Auto Industry Development and Export Policy (AIDEP). The National Tariff Policy aims to reduce tariffs to 7.4% by 2030. The further decrease to 6% will come from changes in the auto sector tariffs starting next year. The government will also completely abolish additional customs duties and cut regulatory duties significantly. The IMF has long expressed concerns regarding high levels of protection for local industries. They initially sought a reduction to about 5% but agreed to 6% after discussions. The new tariff policy will be submitted to the federal cabinet before the end of June, and the changes will be included in the fiscal budget for 2025-26. The plan includes abolishing a 7% additional customs duty on specific goods this July, as well as various reductions on other duty slabs over the next few years. These measures aim to improve vehicle affordability and increase trade significantly, with exports projected to reach $47 billion by 2030. Discussions with the IMF also covered adjustments related to energy tariffs, as the government regulates petroleum product prices through levies. Overall, the agreement reflects a push toward opening Pakistan’s economy to enhance trade and growth prospects.