The International Monetary Fund (IMF) has termed Pakistan’s customs and tariff system overly complex and fundamentally flawed, warning that persistently high import duties have weakened exports and distorted the country’s economic structure.
In its latest assessment, the IMF said Pakistan’s existing tariff framework largely favors a small number of sectors and large firms, reducing overall competitiveness and creating long-term inefficiencies in the economy. The report noted that although customs duties were gradually reduced over the years, the benefits were neutralized by a sharp increase in additional and regulatory duties, making tariff reforms ineffective.
The IMF pointed out that Pakistan’s overall tariff levels during the last fiscal year were higher than those of most regional peers. According to the Fund, elevated tariffs have contributed to falling export performance and poor allocation of resources across the economy. The impact has been especially severe in sectors such as automobiles, agriculture, and food, with import duties in the auto sector exceeding 150 percent, making it one of the most heavily protected industries in the country.
The report warned that excessive protection through high tariffs discourages efficiency, limits global market integration, and undermines export growth. Without deep structural reforms, the IMF cautioned that Pakistan could continue facing trade imbalances, weak investment inflows, and subdued economic growth.
Pakistan has informed the IMF that comprehensive reforms are underway under the National Tariff Policy 2025–30. The five-year plan aims to simplify and rationalize the tariff structure by gradually reducing customs duty rates. As part of the reform package, customs duty slabs will be cut from five to four, while the maximum customs duty rate will be capped at 15 percent.
The government has also committed to phasing out additional customs duties and regulatory duties. Under the Fifth Schedule, special duties are set to be completely eliminated by the fiscal year 2030. The IMF noted that full implementation of the tariff reforms could reduce Pakistan’s average tariff rate by nearly half.
According to official projections, average tariffs are expected to fall from the current 10.7 percent to between 6.7 percent and 5.3 percent over time. The IMF said such reductions could significantly enhance trade competitiveness, attract investment, and support sustainable long-term economic growth.
