A Closer Look at Pakistan’s New Trade Commitments with the IMF
Introduction
The Government of Pakistan is preparing to roll out the National Tariff Policy (NTP) 2025–30, effective July 1, 2025. Presented as a framework for export-led growth and industrial modernization, the policy is being driven by the Engineering Development Board (EDB) and the Ministry of Industries.
While the intent is progressive, a deeper analysis reveals concerning consequences—including IMF-driven liberalization, geopolitical implications, and serious risks to domestic manufacturing, employment, and national sovereignty.
What Does NTP 2025–30 Propose?
The policy introduces wide-ranging reforms:
- Customs duty slabs reduced from five to four: 0%, 5%, 10%, 15%
- Additional Customs Duties (ACDs) to be phased out in 4 years
- Regulatory Duties (RDs) to be eliminated in 5 years (with no new RDs introduced)
- 5th Schedule of the Customs Act to be phased out over 5 years
- Average applied tariff to drop from 10.6% (FY25) to below 6% by FY30
Under IMF agreements, Pakistan has also committed to:
- Allow commercial imports of used vehicles (under 5 years) from FY26Q1
- Introduce a 40% premium tariff on used cars, to be reduced annually by 10% until zero by 2030
- Replace the age limit on used vehicles with safety/environmental standards by July 2026
- Remove non-tariff barriers (NTBs) and simplify import/export policies
- Eliminate all sectoral tax exemptions, including those in agriculture and ex-FATA/PATA
Impact on the Automobile Industry
The automobile sector is among the most heavily protected in Pakistan, following the furniture and tyre industries. These protections were purposefully introduced to:
- Encourage local manufacturing
- Reduce import dependency
- Support employment generation
- Facilitate technological localization
Now, sudden liberalization without phased readiness poses a severe threat:
- Billions in investments risk devaluation
- Millions of jobs across the ecosystem (vendors, OEMs, aftersales) are vulnerable
- A fragile industry faces competition from imported used vehicles, impacting both price control and innovation
While experts have been advocating for an export-oriented shift, the reality is: Have we prepared our industry—or our people—for this transition?
Are we producing globally competitive vehicles, raw materials, or components?
Or are we still dependent on importing whatever looks appealing?
(We imported whatever looked good—but this doesn’t build an industry.)
IMF Influence and Geopolitical Imbalance
While the NTP aligns with IMF benchmarks for fiscal reform, it risks long-term industrial erosion. Reforms that reduce protection for strategic sectors such as auto, steel, electronics, and dual-use defense technology weaken economic sovereignty and self-reliance.
Simultaneously, India is rising as a manufacturing hub. Global firms like Apple are shifting production there, while the West deepens its tech and defense ties with New Delhi. Meanwhile, Pakistan is being asked to dismantle protections and comply with IMF liberalization—without equivalent capacity-building support.
Potential Benefits of NTP 2025–30
- Enhances export competitiveness by reducing input costs
- Simplifies tariff structures, improving compliance and trade predictability
- Aligns with WTO norms, building international trade confidence
- Encourages integration into global value chains
Key Risks and Drawbacks
- Threatens local manufacturing and jobs
- Undermines strategic industries including autos and defense
- Reduces fiscal space due to declining tariff revenues
- Promotes import dependency over local innovation
- Reflects external control over internal economic policy
Few Important Questions:
> Question #1:
Is the IMF forcing Pakistan to remain weak in manufacturing and restrict its defense capabilities?
Answer:
While the IMF focuses on macroeconomic reform, its conditionalities often ignore the realities of underdeveloped industries. The removal of protective policies can delay indigenous defense production and manufacturing localization, inadvertently weakening Pakistan’s strategic capacity.
> Question #2:
Is this a dual-faced global strategy—supporting India while pushing Pakistan into economic pressure?
Answer:
Yes. While India receives incentives, FDI, and trade access, Pakistan is burdened with austerity and liberalization without support for industrial capacity-building. This asymmetry exposes geopolitical imbalance in South Asia’s economic future.
> Question #3:
Why are Pakistani higher officials unable to defend against this policy?
Answer:
- Limited bargaining power due to economic crises and IMF dependency
- Lack of long-term vision and fragmented industrial policy
- Inadequate technical preparation in negotiations
- Geopolitical and diplomatic pressures
- Disconnect from industry realities within bureaucracy
- Short-term political survival prioritized over long-term growth
What needs to change?
Pakistan must build technically strong, industry-informed, and unified negotiating teams to protect national interests in all future policy dialogues.
> Question #4:
Why is the local industry—especially the Big 7 automakers—silent and not protesting against these drastic policy changes?
Answer:
- Corporate diplomacy and fear of backlash
- Many companies rely on government licenses and incentives
- Global ownership and shifting focus
- MNCs are re-prioritizing India and other markets
- Short-term commercial focus
- Prioritizing sales and adaptation over activism
- Lack of collective voice
- No strong, unified industry forum with lobbying influence
- Hope for internal reversal
- Many are lobbying quietly instead of going public
Key Take-away: Pakistan at a Crossroads
The National Tariff Policy 2025–30 may be rooted in reform—but unbalanced liberalization without domestic readiness could trigger de-industrialization, job loss, and economic dependency.
For Pakistan to grow sustainably:
- Reforms must be phased, sector-sensitive, and strategic
- Domestic industries must be empowered, not exposed prematurely
- Economic sovereignty must be guarded not just with words—but with vision, unity, and action.
This exclusive article has been published in Automark Magazine’s June-2025 printed and digital edition. Written by @asif-mehmood