Pakistan has agreed to introduce a new five-year auto sector policy under its deal with the International Monetary Fund, aiming to reduce import tariffs and reform trade rules. The move is linked to the country’s $7 billion bailout program and reflects broader economic commitments made by Islamabad.
Under the proposed framework, the weighted average tariff on vehicle imports will gradually decline from 10.6% to 7.4% by 2030. The first reduction is expected in the 2026-27 budget, where the rate will fall to 9.5% as part of phased reforms.
Officials confirmed that the policy aligns with the IMF’s Extended Fund Facility requirements, which emphasize lowering trade barriers and simplifying the tariff structure. The government has also committed to avoiding new regulatory duties on vehicle imports moving forward.
The new auto policy is expected to come into effect from July 1, 2026. It will introduce a simplified tariff system based on four slabs: 0%, 5%, 10%, and 15%, with customs duty on completely built-up vehicles capped at 15% over the next five years.
Authorities say the reforms aim to support local manufacturing, encourage localization of parts, and ultimately reduce vehicle prices for consumers. By fiscal year 2030, the average tariff in the auto sector is projected to decline further to around 6%.
In addition, the government plans to phase out extra customs duties and regulatory duties, including the current 40% duty on used car imports. Adviser Haroon Akhtar Khan stated that the policy is nearing completion and will soon be presented for cabinet approval.
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