ISLAMABAD: News Story by Saeed Chaudhry
Pakistan’s protectionist and highly complex tariff system is costing the economy billions of rupees each year, undermining industrial growth, and holding back exports, according to a new Policy Viewpoint released by the Pakistan Institute of Development Economics (PIDE).
Authored by Dr. Uzma Zia, Senior Research Economist at PIDE, the study titled “Rationalizing Pakistan’s Tariff Regime for Export-Led Growth” warns that the current tariff structure has created inefficiencies, distorted market signals, and increased production costs for both manufacturers and consumers.
The report notes that Pakistan’s tariff regime—driven by Regulatory Duties (RDs), Additional Customs Duties (ACDs), and exemptions under the 5th Schedule—protects inefficient industries at the expense of competitiveness. “Every additional year under the current tariff system slows export growth, raises production costs, and deepens the trade deficit. Pakistan can no longer afford this inefficiency,” Dr. Zia cautioned.
The upcoming National Tariff Policy (NTP) 2025–30 provides a roadmap for reform, including phasing out ACDs within four years and RDs within five, and shifting items from the 5th Schedule to the 1st Schedule. If fully implemented, PIDE estimates that tariff reforms could increase exports by 10 to 14%, strengthen industrial competitiveness, and reduce inflation by lowering input costs.
The report recommends reducing the customs duty structure from five slabs to four—0%, 5%, 10%, and 15%—within five years and eliminating all tariff peaks above 20%. It also calls for a harmonized tariff approach: lowest duties on raw materials, moderate on intermediate goods, and highest on finished consumer products.
For the auto sector, the study proposes tariff alignment under the Automotive Industry Development and Export Plan (AIDEP 2021–26), including removing ACDs and RDs, lowering duties, and allowing controlled imports of used vehicles under strict quality and environmental standards.
The study acknowledges potential resistance from industries benefiting from protectionism, as well as challenges posed by exchange rate pressures and global commodity price volatility. However, it stresses that delay would mean lost investment, weak export growth, and continued burden on consumers.
PIDE concludes that Pakistan is at a turning point and must shift from a revenue-driven, protectionist tariff regime to a globally competitive, export-led model. “Tariff reform is not just an economic necessity rather it is a national imperative,” Dr. Zia said. “Simplifying tariffs, eliminating distortions, and aligning policy with long-term growth goals can reshape Pakistan’s economic future.”
