Pakistan Pursues Export Growth Through Tariff Reform
Finance Minister Outlines Plan for Economic Revitalization
Pakistan is prioritizing export-led economic growth through significant tariff reductions, aiming to boost competitiveness and attract foreign investment. The move comes as the nation navigates economic challenges and seeks to solidify its financial stability.
Tariff Adjustments and IMF Alignment
Muhammad Aurangzeb, Pakistan’s Finance Minister, detailed the planned tariff reforms following the release of the federal budget for the upcoming fiscal year. These adjustments, aligned with requirements from the International Monetary Fund (IMF), involve removing additional customs duties on four product categories and reducing them on 2,700 tariff lines. These reductions directly benefit exporters by lowering the cost of raw materials.
Aurangzeb emphasized that these measures represent an initial step, with further reductions planned incrementally. This is an East Asia moment for Pakistan. Whatever was available in the fiscal space is the direction of travel. We have tried to reduce tariffs. This is not the eventual end state.
he stated during a press briefing in Islamabad.
Despite concerns about potential revenue decline, the government believes the long-term benefits of increased exports outweigh the short-term losses. According to the State Bank of Pakistan, exports accounted for approximately 20% of the country’s GDP in the last fiscal year, highlighting the sector’s importance to overall economic health. State Bank of Pakistan
Journalist Protest and Budget Details
A press conference intended to elaborate on the Finance Bill 2025 was briefly disrupted when journalists staged a walkout in protest over not receiving a technical briefing from the Federal Board of Revenue (FBR). The briefing would have detailed the legislative aspects of the proposed budget measures. Aurangzeb, accompanied by FBR Chairman Rashid Mahmood Langrial and Finance Secretary Imdadullah Bosal, continued the conference with a reduced media presence.
The budget includes modest relief for the salaried class and incentives for the real estate and construction sectors, aiming to stimulate economic activity. Aurangzeb also highlighted a 0.5% reduction in super tax for the corporate sector.
Addressing Inflation and Wages
Aurangzeb stressed the importance of linking salaries and pensions to inflation rates, a practice he described as standard globally. He also addressed concerns about the minimum wage, stating that feedback from industries would be considered before any adjustments are made. If we are saying the inflation is declining, similarly, the salary or pension has to benchmarked with inflation. This is not just the rule in Pakistan but across the world.
Taxation and Enforcement
The government aims to increase the tax-to-GDP ratio to 10.9% in the next fiscal year. Aurangzeb noted that additional taxes account for approximately Rs312 million of the total Rs2.2 trillion target. He emphasized a shift towards improved tax enforcement, reporting that efforts in this area have already yielded over Rs400 billion in revenue.
Regarding agricultural taxation, a proposed tax on fertilizers and pesticides was negotiated down following discussions with the IMF and Prime Minister Shehbaz Sharif, recognizing their critical role in the agricultural sector.
Looking Ahead
Aurangzeb acknowledged past shortcomings in implementing economic measures, stating that a key focus now is on enforcement and reversing previous policies that hindered growth. He expressed optimism about Pakistan’s economic future, emphasizing the government’s commitment to creating an enabling environment for businesses and citizens alike. The minister also confirmed plans for regular engagement with journalists, with briefings scheduled every four to six weeks.
