Car prices likely to drop in Pakistan amid IMF new relief

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have reached an agreement to reduce the country’s weighted average tariffs to 6% over five years, starting from July 2025.

This significant move aims to open up Pakistan’s economy to foreign competition, making its tariffs the lowest in South Asia, down from the current 10.6%.

The reduction in tariffs is expected to have a positive impact on the local automotive industry, as it will lead to a decrease in the prices of cars. With reduced import costs, manufacturers will be able to pass on the benefits to consumers, making cars more affordable for the masses.

The tariff reduction will be implemented under two policies: the National Tariff Policy and the Auto Industry Development and Export Policy (AIDEP). Under the National Tariff Policy, the tariff will be set at 7.4% for all sectors, excluding the automobile sector. This is slightly higher than the previously agreed 7.1%.

In the automobile sector, the tariff reduction will be more significant. All additional customs duties and regulatory duties will be eliminated by 2030, and the maximum tariff for all imports will be capped at 20%. This will make Pakistan’s automotive industry more competitive, both domestically and internationally.

Furthermore, regulatory duties on vehicles will also be reduced by 55-90% in the first year, with further reductions to follow in subsequent years. A new 6% customs duty slab will be introduced, and existing duties on various slabs will be reduced over the next few years.

Other significant changes include the complete abolition of additional customs duties, an 80% reduction in regulatory duties, and the withdrawal of certain concessions under the Customs Act’s fifth schedule.

The new policy will also remove a 7% additional customs duty on specific goods and a 2% duty on a zero-tariff slab, effective from July this year.

Although the IMF had initially sought a reduction to a 5% weighted average tariff, the federal government has committed to reducing it to 6%. The government plans to have the new tariff policy approved by the federal cabinet before the end of June, with full implementation in the 2025-26 budget.

Overall, the reduction in tariffs is expected to have a positive impact on Pakistan’s economy, making it more competitive and attractive to foreign investors. The move is also expected to benefit consumers, as reduced import costs will lead to lower prices for various goods, including cars.