Finance Minister emphasizes need of tariff adjustments to increase domestic exports

ISLAMABAD: The Finance Minister emphasized the need of tariff adjustments under the National Tariff Policy adding that the tariff reforms have been made in the budget as 4,000 tariff lines have been reduced to zero.

Finance Minister Muhammad Aurangzaib said while holding a post-budget press briefing today in Islamabad to discuss key aspects of Budget 2025-26.

There are a total of 7,000 tariff lines, out of which 4,000 tariff lines have been reduced to zero. Tariff reforms will increase domestic exports, he said.

Aurangzeb praised tariff rationalization as a “major and important step” in aligning Pakistan’s trade and industrial policies with global standards.

The effort signals the start of a phased approach to a simpler tariff system, with the eventual goal of achieving an average tariff rate of slightly more than 4%, he added.

“People ask us that the revenue will decline but if we have to take this country forward towards an export-led discussion I want to go into the details of the steps we have taken,” he told journalists.

“If we want to structurally reposition the country towards export-led growth, we need to change the very DNA of the economy,” Aurangzeb said. “That’s how we avoid falling into the same cycle of dollar shortages every time we try to grow.”

At the outset of the briefing, journalists walked out of Finance Minister Muhammad Aurangzeb’s post-budget press conference in protest over the absence of a technical briefing on the Finance Bill.

With reporters gone, government officials and PTV staff were the only ones left in the room as the minister continued the press conference without media presence.

Agriculture Sector

Speaking about agriculture, he stated that in spite of pressure from the IMF, the government decided not to charge fertilizers and agricultural medications. Both the Finance Minister and the Finance Secretary stated, “We protected agriculture on the Prime Minister’s instructions.”

The federal government is dedicated to collaborating with the provinces to provide finance for small farmers, they said, adding that agriculture “is and will remain the backbone of the economy.” Additionally, a number of measures are being considered to further boost the agriculture sector’s growth.

Talking about the tax increase on solar panels, the finance czar said that the country has two types of solar panels with distinct tax treatment. Previously, locally produced solar equipment was exempt from taxes, while imported full solar systems were already subject to taxes, said the Minister.

The minister clarified that domestic manufacturers now face an unfair playing field as a result of this tax difference. In order to preserve and support Pakistan’s indigenous solar sector, the FBR chairman said, “the tax on imported solar panels was implemented specifically to boost domestic production and reduce reliance on foreign solar imports.”

Tax-to-GDP ratio

“We have two ways — either we ensure enforcement or we introduce additional measures of up to Rs 400 to 500bn. This is why we will go to the parliament to help us out with the enabling amendments and legislation,” finance minister said.

“We have laws, legislation and taxes but we were not able to enforce it, so in this fiscal year, we have worked on enforcement, which has exceeded Rs400 billion.” He said while expressing the aim to to reach a tax-to-GDP ratio of 10.9pc by the next year.

When questioned about the recent pay raise for the speaker of the National Assembly and the chairman of the Senate, the minister stated that their pay had not been “adjusted” since 2016. He emphasized that since it hadn’t been done in nine years, the hike was “all of a sudden.”

“Everything will be done in consultation with provinces,” Auranzgeb said in response to a query about how the federal government might decouple population from the National Finance Commission (NFC) award.

“We signed a national fiscal pact with the provinces, and without them, nothing will be done,” he continued.