In an interested development, government has accepted the International Monetary Fund’s (IMF) major demand to shun import tariffs in order to open up its economy to foreign competition, particularly in automobiles and minerals sector.
Pakistan currently has strict import regulations which make it difficult for foreign products or companies to create a market. In simple words, Pakistan has a highly protected domestic economy with sharp import tariffs, making it easier for domestic companies to thrive often on consumers’ expense.
The tariff changes will completely alter the automobile sector of the country as government as agreed to end undue protections given to local automobile giants by 2030.
This will significantly reduce the costs of cars in Pakistan as local companies have to engage in competition with foreign companies.
Pakistan and IMF have gotten closer on Staff-Level Agreement for approval of $1 billion loan on Tuesday, with Pakistan agreeing to liberalise its economy.
If Pakistan slashes import tariffs by one-third, the country would lose Rs278 billion in tax revenue; however, it would be expected to be by increase in economic activity due to trade liberalisation.
The federal government has also agreed to cut custom duties, regulatory duties by 75 percent in a bid to open up its economy.
It should be highlighted that the agreements stipulates that Pakistan would reduce tariffs from the current 10.6% to just 7.1% over five years, starting in July this year.
According to details, Pakistan has assured the IMF that it would introduce a tariff reduction plan would be implemented over five years. While the IMF has also sought assurances that the country would not derail these conditions after the IMF programme ends in 2027.
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