The Pakistani government is set to implement significant reductions in import taxes, aiming to invigorate trade and stimulate economic growth. In the upcoming fiscal year 2025-26 budget, import duties are expected to be lowered by approximately Rs120 billion. This move is part of a broader five-year strategy to simplify the tariff structure and enhance the country’s competitiveness in the global market.
Despite opposition from the Ministries of Commerce and Industries, who voiced worries about possible negative impacts on the manufacturing sector and the balance of payments, Prime Minister Shehbaz Sharif has approved the plan. Contrarily, the Finance Ministry and the Federal Board of Revenue (FBR) support the initiative, viewing it as a step toward modernizing Pakistan’s trade policies.
The proposed changes include reducing the number of customs duty slabs from five to four, with rates set at 0%, 5%, 10%, and 15%, down from the current maximum of 20%. This restructuring aims to simplify the tariff system and reduce the cost of imports. Additionally, the plan involves the gradual elimination of additional customs duties over four years and regulatory duties over five years.
While the initiative is expected to open the economy to increased foreign competition, there are concerns about its impact on the trade deficit. The Finance Ministry estimates that a 1% reduction in duties could potentially widen the trade deficit by 1.7%. Despite these concerns, the government is moving forward with the plan, emphasizing the long-term benefits of a more open and competitive economic environment.
The new tariff policy is more aggressive than previous agreements with the International Monetary Fund (IMF), reflecting Pakistan’s commitment to trade liberalization and economic reform. The government believes that these measures will not only enhance trade but also attract foreign investment and promote sustainable economic growth.
