The International Monetary Fund has termed Pakistan’s customs and tariff system overly complex and structurally weak, warning that consistently high import duties have hurt exports and led to inefficient allocation of resources across the economy.
In its latest assessment, the IMF said Pakistan’s existing tariff framework largely favours a small group of sectors and major companies, reducing overall competitiveness and creating long-term economic distortions. The report noted that although customs duties have been gradually lowered over the years, the benefits were neutralised by a sharp increase in additional and regulatory duties, making the policy ineffective.
The Fund highlighted that Pakistan’s average tariff levels in the last fiscal year were higher than those of other countries in the region. According to the IMF, these elevated tariffs have contributed to falling exports and misallocation of resources, particularly affecting sectors such as automobiles, agriculture, and food. Import duties in the auto sector exceed 150 percent, making it one of the most heavily protected industries in the country.
The IMF warned that excessive protection through high import tariffs has undermined export performance by discouraging efficiency and limiting Pakistan’s integration into global markets. Without comprehensive reforms, the report cautioned, the country risks persistent trade imbalances and weak investment growth.
Pakistan has assured the IMF that wide-ranging reforms are underway under the National Tariff Policy 2025–30. The five-year plan aims to rationalise the tariff structure and gradually reduce customs duty rates. As part of the reforms, customs duty slabs will be reduced 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 and regulatory duties, with special duties under the fifth schedule planned to be eliminated entirely by fiscal year 2030. The IMF noted that if the policy is fully implemented, Pakistan’s average tariff rate could be cut nearly in half.
Under the proposed reforms, average tariffs are expected to fall from 10.7 percent to between 6.7 percent and 5.3 percent. The IMF said such reductions could significantly improve trade competitiveness, attract investment, and support sustainable long-term economic growth.
