Summary of the PIDE Study on pakistan’s Tariff Regime
This article details a study by the Pakistan Institute of Development Economics (PIDE) arguing for urgent adn complete reform of pakistan’s tariff system. Here’s a breakdown of the key points:
The Problem:
* Complex & distorted System: Pakistan’s current tariff regime, heavily reliant on Regulatory Duties (RDs), Additional Customs Duties (ACDs), and 5th Schedule exemptions, is overly complex and hinders economic growth.
* Protection of Inefficiency: It protects inefficient industries,distorts price signals,and increases production costs for both manufacturers and consumers.
* Anti-Export Bias: The system disadvantages export-oriented industries, slowing export growth and widening the trade deficit.
* Cost of Inaction: Continuing with the current system will lead to lost investment, stagnant exports, and ongoing economic hardship.
The Solution:
* Simpler, Transparent, Export-Oriented Regime: the study advocates for a streamlined tariff system focused on promoting exports.
* National Tariff Policy (2025-30): Leverage the existing NTP as a roadmap for reform, specifically:
* Eliminating ACDs within four years.
* Eliminating RDs within five years.
* Transitioning products from the 5th Schedule to the 1st Schedule.
* Rationalized Duty Structure: Reduce the number of duty slabs from five to four (0, 5pc, 10pc, and 15pc) within five years, and eliminate tariff peaks exceeding 20pc.
* Harmonized Duties: Implement a tiered system: lowest duties on raw materials, moderate on intermediates, and highest on consumer goods.
* auto Sector Reform: Align auto-sector tariffs with competitiveness, including duty reductions, removal of ACDs/RDs, and controlled import of used vehicles.
Potential Benefits:
* Increased Exports: Projected increase of 10-14%
* Stronger Industrial Competitiveness
* Reduced Trade Deficit
* Lower Inflation (through reduced input costs)
* Attract Investment in high-value sectors
* Integration into Global Value Chains
* Enduring Industrial Development & Long-Term Prosperity
Challenges:
* Protectionist Resistance: opposition from industries benefiting from the current system.
* External Shocks: Commodity price volatility and exchange rate fluctuations.
Overall Message: The PIDE study emphasizes that Pakistan is at a critical juncture and must act decisively to reform its tariff system to unlock its economic potential and achieve sustainable, export-led growth.
