Government Slashes Import Taxes by Rs120 Billion 2025

The government of Pakistan plans to slash import taxes by Rs120 billion in the 2025-26 budget, a bold strategy to open the economy and spur foreign competition, despite warnings of potential economic fallout. Prime Minister Shehbaz Sharif has endorsed the reduction, to be phased over five years, reducing tariff slabs from five to four with a maximum rate of 15%, down from 20%, aiming to boost trade and exports, per The Express Tribune.

The new customs duty structure will feature slabs of 0%, 5%, 10%, and 20%, abolishing the 3% slab and shifting most tariff lines to 5%, generating Rs70 billion to offset losses. However, the Finance Ministry warns a 1% duty cut could widen the trade deficit by 1.7%, with an estimated revenue loss of Rs512 billion, though increased domestic tax collection is expected to compensate. The trade-weighted average tariff will drop from 10.62% to 9.57%, and the customs duty average from 5.68% to 5.54%. Despite Ministry of Industries and Ministry of Commerce concerns over impacts on manufacturing and balance of payments, the government sees this as crucial for export growth, particularly for industries using imported inputs.

Web context from The Express Tribune notes past tariff cuts led to trade imbalances, while posts found on X reflect industry fears of local sector decline. Critically, the narrative of “boosting exports” may overlook structural challenges—web sources highlight high energy and labor costs, and X sentiment questions International Monetary Fund scrutiny, suggesting economic risks ahead.