Pakistan Launches Ambitious Tariff Reform: 52% Cut in Import Duties to Drive Export-Led Growth
In a bold economic reform move, the Government of Pakistan has unveiled its National Tariff Policy 2025-30, claiming a 52% reduction in average import tariffs over five years. The policy aims to accelerate exports, shrink the trade deficit, and attract investment in high-efficiency industries. However, the plan heavily leans on projections made by the World Bank’s Global Trade Analysis Project (GTAP) model—raising both optimism and concern among experts and lawmakers.
Aiming for Pakistan’s “East Asia Moment”
Secretary Commerce Jawad Paul briefed the National Assembly Standing Committee on Finance, describing the policy as “Pakistan’s East Asia moment.” The plan will reduce the average applied tariff from 20.2% to 9.7%, promising:
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Exports to grow 10–14%
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Imports to rise by only 5–6%
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Net revenue gain of 7–9%
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More efficient industries and job growth
Yet, Finance Minister Muhammad Aurangzeb acknowledged, “These are assumptions — some may work and some may not.”
Concerns Over Reliability and Transparency
Opposition Leader Omar Ayub Khan raised red flags over the reliability of the data. He questioned:
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The impact of reduced tariffs on foreign reserves and inflation
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The sustainability of exports without damaging domestic industry
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Lack of access to the GTAP model, which the government promised to present later
Khan demanded the model be shared with the committee and made public. However, Aurangzeb suggested the World Bank may not agree to a media-inclusive briefing.
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Mixed Signals From Officials
Despite the reform’s promise, senior officials admitted to uncertainty:
“Trade tariff reform will be painful as inefficient firms will shut down,” warned FBR Chairman Rashid Langrial.
PPP MNA Nafisa Shah questioned the unilateral tariff cuts at a time when global economies are trending toward protectionism.
Key Tariff Reforms: What Will Change?
| Year | Avg Tariff (%) | CD (%) | ACD (%) | RD (%) |
|---|---|---|---|---|
| FY25 | 20.2 → 15.7 | 11.2 | 1.8 | 2.7 |
| FY30 Target | 9.7 | Phased out | Phased out | Phased out |
Immediate Changes in FY25 Budget Include:
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Elimination of 2% ACD on zero-duty slabs (2,156 tariff lines)
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Reduction of 3% CD to 0% (896 lines), 11% to 10% (1,023 lines), and 16% to 15% (486 lines)
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ACD Slabs Cut: 7% to 6%, 6% to 4%, 4% to 2%, and 2% completely removed
Focus Areas of the Policy
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Export-Led Growth: Create a level playing field to boost competitiveness
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Green Transition: Support energy-efficient industries and climate-aligned production
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Tech Promotion: Encourage industries like AI, nanotech, robotics, and chemicals
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Auto Sector Reform: Auto duties will be rationalized from July 1, 2026, with major reductions under a new Auto Policy
Revenue Impact: Will It Add Up?
Although static models show a Rs500 billion revenue loss, GTAP forecasts a 7–9% gain due to:
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Increased trade volume
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Reduced smuggling
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Better tax compliance
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Shift of resources to efficient sectors
The FBR projects Rs47 billion net gain for FY25, despite a Rs235 billion direct hit from tariff cuts.
Outlook and Caution
While the policy reflects a significant shift towards free trade principles and export-led industrial policy, experts caution that Pakistan’s ground realities—such as inflation, weak reserves, and industrial underperformance—may dilute the benefits if not managed carefully.
“If raw material tariffs are reduced, it will help, otherwise industries will collapse,” said PTI MNA Mubeen Arif Jutt.
Final Thoughts
The National Tariff Policy is a bold and much-needed step toward restructuring Pakistan’s economic framework. But its success will depend on transparent modeling, efficient execution, and supportive industrial policies that ensure local industries can survive the global competition that liberalized tariffs will bring.
