ISLAMABAD – Pakistan is set to introduce a new five-year auto sector policy in consultation with the International Monetary Fund (IMF), aimed at reducing import tariffs, restructuring duties, and gradually liberalising the automobile market by 2030.
Officials said the policy forms part of commitments under the $7 billion Extended Fund Facility (EFF), under which it has already been agreed that no new Regulatory Duty (RD) will be imposed on imports.
The weighted average tariff is expected to be reduced from 10.6 percent to 9.5 percent in the 2026–27 federal budget, which is likely to be presented on June 1, 2026.
According to official sources, the draft auto policy is in its final stages of preparation and will be shared with the IMF by the end of this month before being submitted for federal cabinet approval. The policy outlines a roadmap under the National Tariff Policy to bring the weighted average tariff down to 7.4 percent by FY2030, with a long-term target of around 5.99 percent for the auto sector.
Under the proposed reforms, customs duties on fully built vehicles will be capped at 15 percent over the next five years. The existing tariff structure is also expected to be replaced with a simplified four-slab system of 0, 5, 10, and 15 percent.
A 40 percent regulatory duty on used vehicle imports is planned for FY2026, which will be gradually reduced and eventually phased out in subsequent years. The reforms aim to promote local manufacturing, increase localisation of parts, and help stabilise vehicle prices.
Adviser to the Prime Minister on Industries Haroon Akhtar Khan said the policy is at an advanced stage and will soon be presented to the prime minister and federal cabinet. He added that consultations with stakeholders have been completed, while a balancing approach will be adopted where differences exist.
The officials further confirmed that the government and IMF have agreed to ensure alignment of the policy with broader tariff reduction commitments under the programme, including the phased elimination of Additional Customs Duties (ACDs) and Regulatory Duties.
The Motor Vehicle Development Act, which provides a statutory framework for the Engineering Development Board to enforce new safety and environmental standards, has also been submitted to parliament and is expected to be passed by the National Assembly before the end of June 2026.
In addition, the government has already legalised commercial vehicle imports, abolished the personal baggage scheme, and tightened rules for gift and transfer of residence schemes to prevent misuse in used vehicle imports.
