ISLAMABAD, Mar 23: Pakistan and the IMF have made further adjustments to the economic liberalisation plan and agreed to cut weighted average applied tariffs to around 6 per cent — a reduction of 43 per cent over five years in the protection level available to local industries, according to a media report.
The International Monetary Fund (IMF) had long been raising concerns over the protection available to local industries, but Pakistani authorities were reluctant to open these areas.
The country has the third-highest trade-weighted average tariffs in South Asia at 10.6 per cent. After the implementation of the full liberalisation plan, it will have the lowest weighted average tariffs in the region.
A weighted average applied tariff is the average of effectively applied tariff rates, weighted by the value of imported goods to which they are applied.
The final adjustments were made during a virtual meeting held on Thursday, The Express Tribune newspaper reported quoting government sources.
It has been agreed that the weighted average applied tariffs will be reduced from the current 10.6 per cent to just around 6 per cent over five years, starting in July this year, they added.
This 43 per cent reduction in tariffs will completely open the economy to foreign competition.
But the reduction will be achieved under two different policies. Under the new National Tariff Policy, the weighted average tariffs will be reduced to 7.4 per cent by 2030.
To cut these further to around 6 per cent, the government will lower tariff protection available to the automobile sector through the Auto Industry Development and Export Policy (AIDEP) 2026-30 from July next year, according to the sources.
The Ministry of Commerce deals with the National Tariff Policy, while the Ministry of Industries is responsible for the AIDEP Policy.
Pakistan’s agreement with the IMF on trade liberalisation comes at a time when the world is closing its borders to foreign companies.
Pakistan has assured the IMF that it will seek approval of the new tariff policy from the federal cabinet before the end of June. The tariff reduction will be implemented in the fiscal year 2025-26 budget, to be presented in Parliament in June. (PTI)
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