ISLAMABAD: Pakistan has reached an agreement with the International Monetary Fund to introduce a five-year auto sector policy aimed at gradually reducing tariffs on vehicle imports as part of reforms linked to its $7 billion bailout program. The development marks a significant step toward trade liberalization and economic restructuring.
Under the proposed plan, the weighted average tariff on vehicle imports will decline from 10.6 percent to 7.4 percent over four years, with a long-term target of around 6 percent by fiscal year 2030. As an initial measure, the rate is expected to drop to 9.5 percent in the 2026–27 federal budget. Officials confirmed that the policy aligns with commitments under the IMF’s Extended Fund Facility, which calls for simplified tariff structures and reduced trade barriers.
Moreover, the new policy, expected to take effect on July 1, 2026, will introduce a streamlined tariff regime consisting of four slabs: 0 percent, 5 percent, 10 percent, and 15 percent. Consequently, customs duties on completely built-up vehicles will be capped at 15 percent over the next five years.
In addition, authorities have agreed not to impose any new regulatory duties on imports. The government and the IMF also plan to phase out existing additional and regulatory duties by 2030, including a current 40 percent duty on used vehicle imports, which will gradually be reduced to zero.
Adviser to the prime minister on industries, Haroon Akhtar Khan, stated that the policy is in its final stages and will soon be presented to the prime minister and federal cabinet for approval. He added that stakeholder consultations are ongoing to ensure consensus.
Meanwhile, the government is updating the regulatory framework, including the proposed Motor Vehicle Development Act, to strengthen safety and environmental standards.
