The International Monetary Fund (IMF) has described Pakistan’s customs and tariff structure as complex and flawed, warning that persistently high import duties have weakened exports and distorted resource allocation across the economy.

In its latest assessment, the IMF noted that Pakistan’s current tariff framework disproportionately benefits a limited number of sectors and large companies. According to the report, this imbalance has reduced competitiveness and created long-term inefficiencies.

The fund observed that the gradual reduction in customs duties over past decades failed to deliver expected benefits. This was largely offset by a sharp rise in additional and regulatory duties, rendering the policy ineffective.

Pakistan’s tariffs higher than regional peers

The IMF highlighted that during the last fiscal year, Pakistan’s overall tariff levels were higher than those of other countries in the region. High tariffs, the report said, have contributed to declining exports and the misallocation of economic resources.

The impact is particularly severe in sectors such as automobiles, agriculture, and food. Import tariffs exceeding 150 percent have been imposed on the auto sector, making it one of the most protected industries in the country.

High tariffs hurting export performance

According to the IMF, excessive protection through import tariffs has negatively affected Pakistan’s export performance. The Fund stressed that shielding domestic industries at such high rates discourages efficiency and limits integration into global markets.

The report warned that without comprehensive reform, Pakistan risks continued trade imbalances and subdued investment growth.

Pakistan has assured the IMF that a large-scale reform process is underway under the National Tariff Policy 2025–30. The policy outlines a five-year plan to gradually reduce customs duty rates and rationalize the tariff structure.

As part of the reforms, customs duty slabs will be reduced from five to four. The maximum customs duty rate will be capped at 15 percent, according to government commitments shared with the IMF.

The government has also pledged to phase out additional customs duties and regulatory duties. Under the fifth schedule, special duties are planned to be eliminated entirely by fiscal year 2030.

The IMF noted that with full implementation of the tariff policy, Pakistan’s average tariff rate could be reduced by nearly half.

Tariffs expected to fall sharply over time

Under the government’s plan, average tariffs are expected to decline from 10.7 percent to between 6.7 percent and 5.3 percent. The IMF said such reductions could significantly improve trade competitiveness.

According to official documents, the reforms aim to promote trade, attract investment, and support long-term economic growth.