Pakistan, IMF Scrap Baggage Schemes, Tighten Car Imports

Pakistan and the International Monetary Fund (IMF) have forged an agreement to eliminate two baggage and gift schemes for car imports and impose stricter controls on the Transfer of Residence (ToR) scheme, while permitting commercial imports of five-year-old used cars under rigorous conditions and bolstered safety safeguards, according to official sources cited by The News.

The IMF has mandated a deadline for securing approval from the Economic Coordination Committee (ECC) of the Cabinet to enact these reforms within the current month.

This consensus precedes the anticipated conclusion of the second review of the $7 billion Extended Fund Facility (EFF) and the first $400 million tranche under the $1.4 billion Resilience and Sustainability Facility (RSF).

Under the revised framework, the baggage rules and gift scheme for car imports will be abolished. For the ToR scheme, vehicles can only be imported from countries where the individual has resided for at least one year, with robust measures to curb misuse. Officials pointed out that imported cars frequently route through Dubai before reaching Pakistan, underscoring the urgency for enhanced controls to prevent violations.

Conversely, Iftikhar Ali Malik, former President of the SAARC Chamber of Commerce and Industry (SAARC CCI), implored the government to rethink the liberalization of commercial used car imports, arguing it endangers Pakistan’s domestic automobile sector and the livelihoods of thousands of workers.

In a statement, Malik asserted that both developed and developing countries shield their local industries and advocated for a long-term policy framework that champions sustainability, competitiveness, and innovation in the auto sector. He cautioned that unrestricted used car imports could discourage future foreign investment in Pakistan’s burgeoning automotive industry.

Malik urged the government to incentivize local manufacturing and assembly via technology transfers and investor-friendly policies, rather than an import-dependent approach. He highlighted that local manufacturers have poured billions of rupees into investments, generated employment, and contributed substantially to the national exchequer through taxes and duties.

“Balancing imports with domestic industry support will not only enhance employment but also trim the import bill, stabilize foreign reserves, and cultivate industrial growth and economic self-reliance,” he added.