Planned import policy reforms to emphasize tariffs according to the industrialization and export of Pakistan mean an important positive change in government economic and growth strategy.
Prime Minister Shehbaz Sharif has approved a road map to drastically reduce the average customs tariffs of 19pc to 9.5pc in the next five years, in addition to eliminating the protections of distorted rates of decades for car manufacturers, steel producers, textile manufacturers, the chemical sector and others against foreign competition. Another key reform focuses on reducing the number of service slabs existing from five to four, with reduced maximum rates from 20pc to 15pc.
The road map also provides that it eliminates numerous regulatory and additional taxes on thousands of imported items to provide certainty, transparency and uniformity to waterfall margins. The reforms are expected to increase exports by $ 5 billion once the adjustments are gradually introduced, starting with the next budget.
More importantly, the lowest tariff barriers will greatly contribute to help Pakistan integrate into the global economy with considerable ease. Tariff reforms must also boost our industrial competitiveness and allow manufacturers to be part of global supply chains by giving greater access to raw materials and semi-terminated products.
Commercial policy professionals generally agree that high import taxes are a regressive form of taxes, since companies are more interior, thus creating an anti-exports bias within the framework of general economic policy. Our tariff policy is a testimony of that. For decades, we have imposed some of the highest rates, an important reason why Pakistan has not gone to the manufacture of high quality products and added value. And regionally, its export relationship to GDP remains one of the lowest. High import rates and the inability to acquire goods that can support technological progress exacerbate economic challenges.
In fact, there is concern that the lowest tariffs, which Pakistan has used so far as an important source of fiscal income collection instead of industrialization and growth of exports, would lead to higher imports and, ultimately, to another crisis of payment equilibrium. But such concerns are exaggerated and are being raised by those who have earned money using tariff protections. There is no doubt that imports would increase, but exports will grow at a much faster rate, reducing the commercial deficit and creating more jobs.
However, the assumption that a renovated tariff policy can do magic alone is out of place. Although Pakistan import taxes remain higher than their peers, they have decreased considerably since the early 1990s, when the country embarked on the road to economic and commercial liberalization.
However, the drop in average tariffs since then has not translated into proportional growth or significant integration in the global economy. This means that there are also other policies that must be fixed along with tariffs.
Posted in Dawn, May 17, 2025
