Car prices in Pakistan may drop after new IMF relief

In a landmark move to boost economic competitiveness, Pakistan and the International Monetary Fund (IMF) have agreed to slash the country’s weighted average tariffs to 6 percent over the next five years. This strategic decision will significantly open Pakistan’s market to global trade, making it the country with the lowest tariff rates in South Asia—down from the current 10.6 percent.

Key Highlights of Pakistan’s New Tariff Policy

The tariff reduction initiative will officially kick off in July 2025, with a target to achieve a 6% average by 2030. This reform is designed to encourage foreign investment, increase economic efficiency, and reduce costs across several sectors, most notably the automobile industry.

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Impact on Pakistan’s Auto Sector

Local car prices are expected to decline as a direct result of reduced import duties and related levies. Under the Auto Industry Development and Export Policy (AIDEP), all additional customs and regulatory duties on vehicles will be eliminated by 2030, while maximum tariffs on auto imports will be capped at 20 percent.

In the first year of implementation, the government will reduce regulatory duties on vehicles by 55-90 percent, paving the way for greater affordability and competition in the automotive market.

National Tariff Policy Adjustments

In addition to the AIDEP, the National Tariff Policy will bring the weighted average tariff (excluding the auto sector) to 7.4 percent by 2030—a slight increase from the previously targeted 7.1 percent, but still a substantial overall reduction.

Key measures include:

Complete abolition of additional customs duties
80% reduction in regulatory duties
Removal of a 7% additional customs duty on specific goods
Withdrawal of 2% duty on zero-tariff slab items
Elimination of certain concessions under the Customs Act’s Fifth Schedule

What’s Next?

Although the IMF initially proposed a 5 percent average tariff target, Pakistan has committed to a more feasible 6 percent. The new tariff structure is expected to be approved by the federal cabinet before June 2025, with full implementation in the 2025-26 budget.

Conclusion

This tariff overhaul marks a significant milestone in Pakistan’s journey toward economic modernization. With reduced costs for imports, particularly in the automotive sector, consumers can expect more competitive pricing and greater access to global products. At the same time, the policy is set to attract foreign investors looking for a low-tariff entry point into South Asia.