Pakistan has reached an agreement with the International Monetary Fund (IMF) to introduce a new five-year auto sector policy that will gradually reduce tariffs on vehicle imports as part of broader trade reforms under the country’s $7 billion bailout programme.
Under the proposed policy, the weighted average tariff on vehicle imports will be reduced from 10.6% to 7.4% by 2030, according to official sources cited in a national daily. As an initial step, the average tariff rate is expected to fall to 9.5% in the 2026–27 federal budget.
IMF-linked trade reforms
The tariff reductions form part of Pakistan’s commitments under the IMF’s Extended Fund Facility, which requires the government to lower trade barriers and simplify the tariff regime.
Officials said Islamabad has also agreed that no new regulatory duties will be imposed on imports during the reform period.
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The new auto policy is expected to take effect from July 1, 2026. It is currently being finalised by the government and is scheduled to be shared with the IMF by the end of the month, before being submitted to the prime minister and the federal cabinet for approval.
New tariff structure for auto sector
According to officials, the policy will overhaul the existing tariff framework by introducing four duty slabs of 0%, 5%, 10% and 15%. Customs duty on completely built-up (CBU) vehicles is expected to be capped at 15% over the next five years.
By fiscal year 2030, the weighted average tariff for the auto sector is projected to decline further to around 6%, aligning Pakistan’s trade policy more closely with IMF-backed reform targets.
Gradual removal of regulatory duties
The government and the IMF have also agreed on the phased elimination of additional customs duties and regulatory duties in the auto sector by 2030. A 40% regulatory duty currently imposed on used vehicle imports in fiscal year 2026 is expected to be gradually reduced and eventually brought down to zero.
Government assurances and regulatory changes
Adviser to the prime minister on industries Haroon Akhtar Khan said the new auto policy is at an advanced stage and will be submitted to the prime minister and cabinet before being made public.
He said extensive consultations have been held with stakeholders to build consensus, adding that the government will seek a balanced approach where differences remain.
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Alongside tariff reforms, officials said the government is also updating the regulatory framework for the sector.
The Motor Vehicle Development Act, which would provide legal backing to the Engineering Development Board to enforce environmental and safety standards, has already been submitted to parliament and is expected to be approved before the end of June.
Import rules tightened
As part of the reforms, the government has abolished the personal baggage scheme for vehicle imports and tightened conditions for the gift and transfer-of-residence schemes for used cars. The measures are aimed at curbing misuse following the legalization of commercial imports.
Officials said the overall objective of the new policy is to encourage local manufacturing, increase parts localisation, reduce vehicle prices over time, and create a more competitive and transparent auto sector aligned with international trade commitments.
