Latest news with #tariffreform
Arab News
07-07-2025
- Business
- Arab News
Pakistani finmin ties tariff overhaul to $44.9 billion export target in FY26 budget
ISLAMABAD: Pakistan's Finance Minister Muhammad Aurangzeb has stressed the significance of sustained tariff reform as a cornerstone of Pakistan's trade policy, the finance ministry said on Monday, as the country aims to boost exports, streamline imports and maintain a sustainable current account deficit. The statement came after Aurangzeb chaired a meeting of a steering committee for the implementation of the National Tariff Policy, which aims to create a predictable, transparent and investment-friendly tariff structure by facilitating duty-free access to raw materials, phasing out additional customs and regulatory duties, and supporting nascent and green industries to pave the way for innovation, employment generation and sustained economic growth. Pakistan has set an export target of $44.9 billion in the budget for this fiscal year that began on July 1, with $35.3 billion for goods and $9.6 billion for services sector. The government has proposed a target of $65.2 billion for goods imports, while it expects the imports of services to reach $14 billion, with the overall import volume significantly higher than export figures. Speaking at Monday's meeting, the finance minister highlighted that the steering committee was continuously monitoring progress of the tariff policy implementation, state of the country's foreign exchange reserves, and guiding the transition of domestic industry, according to the finance ministry. 'The National Tariff Policy represents a five-year roadmap toward liberalizing trade, fostering export-led growth, and enhancing industrial competitiveness,' he was quoted as saying by the ministry. During the meeting, the National Tariff Commission (NTC) outlined its pivotal role in safeguarding domestic industry through rational tariff structuring and trade remedy actions against unfair trade practices, including dumping, subsidized imports and harmful import surges. The commission apprised the participants of its efforts to bolster institutional capacity, including organizational reforms, targeted technical training, automation of internal processes, establishment of a dedicated facilitation center for exporters, and initiatives to enhance legal and analytical capabilities to strengthen service delivery. The finance minister urged the commission to ensure a level playing field for local producers, with the participants resolving to fully implement the National Tariff Policy to reinforce Pakistan's trade competitiveness and industrial development. Pakistan, currently bolstered by a $7 billion International Monetary Fund (IMF) program, unveiled the tariff policy last month to enable local industries to 'scale, compete globally and shift toward higher value-added exports.' Key sectors expected to benefit include textiles, engineering, pharmaceuticals and information technology, with the policy designed to lower production costs and attract businesses. Separately, Khurram Schehzad, an adviser to the finance minister, said the government had retired Rs500 billion ($1.7 billion) loan to the central bank early, with the overall early paydowns reaching Rs1.5 trillion. 'Early debt retirement while converting shorter-tenure with longer-tenure debt, significantly reduces concentration risk, lowers future liabilities, and strengthens the country's macroeconomic foundations by curbing reliance on borrowing,' he said on X. 'This latest achievement builds on an earlier milestone — the successful buyback of PKR 1 trillion in market debt completed by December 2024 — the first such operation in Pakistan's history. Combined, these two strategic actions amount to the early retirement of PKR 1.5 trillion in public debt in FY25, sending a strong signal of economic confidence and reform.' He said these early repayments and smart refinancing, capitalizing on the significant decline in interest rates with the government's disciplined borrowing, led to a staggering Rs830 billion in interest cost savings in the outgoing fiscal year that ended on June 30.
Arab News
07-07-2025
- Business
- Arab News
Pakistan finance minister stresses tariff reform to achieve budgetary targets
ISLAMABAD: Pakistan's Finance Minister Muhammad Aurangzeb has stressed the significance of sustained tariff reform as a cornerstone of Pakistan's trade policy, the finance ministry said on Monday, as the country aims to boost exports, streamline imports and maintain a sustainable current account deficit. The statement came after Aurangzeb chaired a meeting of a steering committee for the implementation of the National Tariff Policy, which aims to create a predictable, transparent and investment-friendly tariff structure by facilitating duty-free access to raw materials, phasing out additional customs and regulatory duties, and supporting nascent and green industries to pave the way for innovation, employment generation and sustained economic growth. Pakistan has set an export target of $44.9 billion in the budget for this fiscal year that began on July 1, with $35.3 billion for goods and $9.6 billion for services sector. The government has proposed a target of $65.2 billion for goods imports, while it expects the imports of services to reach $14 billion, with the overall import volume significantly higher than export figures. Speaking at Monday's meeting, the finance minister highlighted that the steering committee was continuously monitoring progress of the tariff policy implementation, state of the country's foreign exchange reserves, and guiding the transition of domestic industry, according to the finance ministry. 'The National Tariff Policy represents a five-year roadmap toward liberalizing trade, fostering export-led growth, and enhancing industrial competitiveness,' he was quoted as saying by the ministry. During the meeting, the National Tariff Commission (NTC) outlined its pivotal role in safeguarding domestic industry through rational tariff structuring and trade remedy actions against unfair trade practices, including dumping, subsidized imports and harmful import surges. The commission apprised the participants of its efforts to bolster institutional capacity, including organizational reforms, targeted technical training, automation of internal processes, establishment of a dedicated facilitation center for exporters, and initiatives to enhance legal and analytical capabilities to strengthen service delivery. The finance minister urged the commission to ensure a level playing field for local producers, with the participants resolving to fully implement the National Tariff Policy to reinforce Pakistan's trade competitiveness and industrial development. Pakistan, currently bolstered by a $7 billion International Monetary Fund (IMF) program, unveiled the tariff policy last month to enable local industries to 'scale, compete globally and shift toward higher value-added exports.' Key sectors expected to benefit include textiles, engineering, pharmaceuticals and information technology, with the policy designed to lower production costs and attract businesses. Separately, Khurram Schehzad, an adviser to the finance minister, said the government had retired Rs500 billion ($1.7 billion) loan to the central bank early, with the overall early paydowns reaching Rs1.5 trillion. 'Early debt retirement while converting shorter-tenure with longer-tenure debt, significantly reduces concentration risk, lowers future liabilities, and strengthens the country's macroeconomic foundations by curbing reliance on borrowing,' he said on X. 'This latest achievement builds on an earlier milestone — the successful buyback of PKR 1 trillion in market debt completed by December 2024 — the first such operation in Pakistan's history. Combined, these two strategic actions amount to the early retirement of PKR 1.5 trillion in public debt in FY25, sending a strong signal of economic confidence and reform.' He said these early repayments and smart refinancing, capitalizing on the significant decline in interest rates with the government's disciplined borrowing, led to a staggering Rs830 billion in interest cost savings in the outgoing fiscal year that ended on June 30.
Arab News
14-06-2025
- Automotive
- Arab News
IMF-backed tariff reforms raise concerns for Pakistan's auto industry despite rising car sales
KARACHI: While Pakistan's automobile manufacturers are still parsing the government's new financial plan, industry experts on Friday said proposed International Monetary Fund (IMF)-mandated reforms, such as the rationalization of trade tariffs, could erode long-standing protections for local industry. Finance Minister Muhammad Aurangzeb said the government plans to reduce the overall tariff regime by more than four percent over the next five years to steer the country toward an export-led growth model in line with the IMF program. Under the National Tariff Policy 2025-30, the government aims to abolish additional customs duties (ACDs), regulatory duties (RDs) and provisions under the Fifth Schedule of the Customs Act, 1969. The goal is to simplify Pakistan's tariff structure by reducing it to four duty slabs ranging from 0 to 15%. The IMF-backed reforms are expected to lower Pakistan's weighted average tariff by 3.2% points to 7.4%, said Shafiq Ahmed Shaikh, an automobile industry expert and former general manager of Pak Suzuki Motor Company Ltd. 'These tariff cuts will reduce protection to the auto industry along with reduction of the cost of vehicles,' he said. 'It is a very sensitive point for industry… [and] must be discussed with the stakeholders for good, long-term and acceptable solutions.' PARA-TARIFFS Abdul Waheed Khan, spokesperson for the Pakistan Automotive Manufacturers Association (PAMA), said regulatory duties are designed to protect local industry and discourage unnecessary imports. 'The ACD too should gradually be abolished because such para-tariffs are not good,' he told Arab News. Para-tariffs are taxes and duties levied in addition to standard customs tariffs, such as ACDs and RDs. While often introduced to curb imports or raise revenues, they are controversial because they can create complexity, raise costs and distort trade policy. Pakistan's federal budget also proposes raising the sales tax on 850cc small vehicles to 18% to bring parity between petrol or diesel-powered cars and hybrids. 'This would increase the cost of vehicles for middle income groups,' said Khan of PAMA, which represents the local operations of Honda, Suzuki, Toyota and 16 other manufacturers. 'This is not good for our Made-in-Pakistan policy as small vehicles will go costlier at a time when people's disposable incomes are already not so good,' he continued, declining further comment on the budget. CARBON LEVY Pakistan's automobile market, long dominated by Japanese firms like Honda, Toyota and Suzuki, has recently seen new entrants, particularly Chinese and Korean electric vehicle (EV) manufacturers like BYD, SAIC and Kia, operating through joint ventures. 'The existing industry will face good competition from EV and as we know, the future is of Electric Vehicles specially from China,' Shaikh, the automobile industry expert, told Arab News. As one of the countries most affected by climate change, Pakistan also plans to introduce a carbon levy of up to Rs10 ($0.04) per liter on petrol, diesel and furnace oil over the next two years. The move is intended 'to discourage excessive use of fossil fuels and provide financial resources for climate change and green energy programs,' Finance Minister Aurangzeb said in his budget speech earlier this week. Shaikh dismissed suggestions that the levy would raise car prices, arguing that consumers would instead begin shifting to EVs. Prime Minister Shehbaz Sharif also announced plans to impose differential taxes on the sale and import of vehicles based on engine size to promote the adoption of two- and three-wheeled EVs and reduce oil imports and pollution. Syed Asif Ahmed, general manager of marketing at MG Motors, said the 'industry is seeking clarity on recent budget.' He noted that while the finance bill was silent on hybrid electric vehicles (HEVs), social media was abuzz with reports that the government may raise the sales tax from eight % to 18 % next year. 'If true, this will jeopardize the huge investment done by almost all automakers on HEV,' Ahmed said. The MG Motors executive also warned against reduced regulatory duties on used cars and commercial imports under schemes meant for returning expatriates. '[The] used cars importers are abusing the gift, baggage and transfer of residence scheme for commercial trading,' Ahmed said. CAR SALES While stakeholders have voiced concerns over policy shifts, vehicle sales continue to show signs of recovery. Passenger car sales rose 31% in May to 11,119 units, while cumulative sales from July to May in the outgoing fiscal year increased 32% year-on-year to 94,388 units, according to PAMA data. '[The] growth is supported by a more stable macroeconomic environment, lower interest rates, easing inflation and improving consumer sentiment,' said Myesha Sohail, an analyst at Topline Securities Ltd., in a recent research note. Sohail expects this momentum to continue into the next fiscal year, driven by lower interest rates and a pipeline of new models across combustion, hybrid and plug-in hybrid categories.
Arab News
11-06-2025
- Business
- Arab News
Pakistan unveils five-year tariff reform plan, warns of additional taxes if compliance measures blocked
KARACHI: Pakistan plans to cut its overall tariff regime by more than 4% over the next five years, part of sweeping reforms aimed at boosting exports and shifting the country towards an export-led growth model, Finance Minister Muhammad Aurangzeb said on Wednesday. At a post-budget press conference in Islamabad, Aurangzeb outlined details of the proposed tariff rationalization, saying the government had already removed additional customs duties on 4,000 tariff lines and reduced them on another 2,700, out of a total 7,000. The reforms align with Pakistan's commitments under a $7 billion IMF program approved last year and signal a shift toward an export‑oriented growth model built on a leaner tariff structure, protection of social welfare, and improved tax collection. 'First, the goal is to change the overall protected regime. When you lower protection and dismantle walls around it, you improve the economy's resource allocation, better capital allocation, better human resource allocation, so that's the overall macroeconomic framework," Aurangzeb said, adding that the changes would reduce input costs for exporters and improve competitiveness. The reforms are part of the National Tariff Policy 2025–30 under which the government plans to abolish additional customs duties, regulatory duties, and the fifth schedule of the Customs Act, 1969. The policy envisions a streamlined customs structure with just four duty slabs ranging from 0 to 15%, which would become the maximum rate. 'According to the World Bank, after the successful implementation of these reforms, Pakistan's average tariff will decline to the lowest level in the region,' Aurangzeb had said during his full-year budget speech on Tuesday, when he presented the Rs17.6 trillion ($62 billion) federal budget for FY2025–26. Describing the initiative as Pakistan's 'East Asia moment' during the post-budget speech, the minister said the plan was designed to help the country avoid recurring balance-of-payments crises. 'So that when we go toward growth we don't get into the dollar situation, we don't get into a balance of payment problem,' he said. 'So that we can continue to grow at a certain pace which is export-led.' Aurangzeb emphasized that the tariff cuts would be phased in gradually, starting this year. 'This I am talking about year one. We will take it towards a more than 4 percent reduction in the overall tariff regime in Pakistan,' he said. The government is aiming to lift exports, which grew more than 6% year-on-year to $26.9 billion during July-April, against imports of $48.3 billion, up 8% in the same period. ENFORCEMENT, ADDITIONAL TAXES Aurangzeb also warned that the government could be forced to impose Rs400–500 billion ($1.4-1.75 billion) in additional taxes if the Pakistani parliament failed to pass enabling legislation needed to implement enforcement provisions tied to Rs312 billion ($1.1 billion) in proposed new tax measures for the coming fiscal year. 'The parliament should help us in enabling amendments so we don't opt for additional measures to stop the leakages in the system,' he said. The minister noted that enforcement actions in the current fiscal year had already yielded Rs400 billion ($1.4 billion) in additional revenue. Without legislative support, the government may be compelled to introduce further taxation to close gaps. Without naming them directly, Aurangzeb said international financial institutions had signed off on Rs389 billion ($1.36 billion) in additional taxes for FY26 as part of budget negotiations. 'We now have the credibility and trust internally and externally that we can do the enforcement,' he said. BUDGET NUMBERS 'LOCKED' WITH IMF Flanking the finance minister, Finance Secretary Imdadullah Bosal said the government had 'locked' all key budget numbers with the IMF. The $7 billion loan program the lender approved for Pakistan in 2024 comes with a strict reforms agenda on fiscal consolidation, debt rationalization, revenue mobilization, among other issues. The IMF, in a recent statement, confirmed Pakistan had committed to continued fiscal consolidation while safeguarding social and priority spending in the new budget. Bosal said the government had managed to reduce current expenditures to under 2% growth in FY25 from 26% in FY24. 'This is our response back to those people who are paying taxes in this country,' Aurangzeb said, adding that the budget had attempted to extend relief to pensioners, salaried individuals, and businesses, despite fiscal constraints. 'The federal government, whatever it is giving, is from the loans that we are taking because we start [the new year] with a deficit.'
