IMF pushes Pakistan to scrap import curbs; govt agrees to phased rollback

ISLAMABAD: Pakistan has informed the International Monetary Fund (IMF) that it will review more than 2,660 non-tariff barriers affecting imports and begin removing a number of them from June this year, according to details of the understanding reached for the staff-level agreement under the $7 billion bailout programme.

According to a report by the Express Tribune, the government has assured the IMF that restrictions affecting 76 customs codes linked to imports in the automobile, pharmaceutical, steel, food, agriculture, cosmetics and mobile phone sectors will be removed in June. Pakistan told the IMF it had carried out a broad review of import and export lines and identified 2,662 non-tariff barriers with restrictive effects on international trade.

The first phase is expected to include measures affecting imports of mobile phones and vehicles. Barriers cited in the report include low priority in foreign exchange allocation for car imports and the requirement linking mobile phone functionality to approval by the Pakistan Telecommunication Authority. These restrictions may be lifted in June.

If implemented, the changes could also ease imports of dairy products, textiles, steel bars and medicines, which are currently affected by existing non-tariff barriers. Pakistan has told the IMF that after the initial set of restrictions is removed, the remaining barriers will be reviewed in stages, with priority given to the most economically distortionary measures. These proposals are to be placed before the Cabinet Committee on Regulatory Reform for removal or simplification by the end of November 2026.

Sectors identified for changes

In the automobile sector, the restrictions under review cover completely knocked down units, semi knocked down kits, completely built units and high-end vehicles. Imports are discouraged through foreign exchange prioritisation, delayed approvals and additional regulatory duties.

For smartphones and consumer electronics, the barriers include PTA approval requirements, high regulatory duties and import licensing constraints. The government is also considering removing non-tariff barriers affecting refrigerators, air conditioners and washing machines, where imports are slowed through banking restrictions and discretionary clearance delays.

In agriculture, Pakistan has assured barrier-free imports of meat, dairy products, packaged foods and edible oil. These imports are currently discouraged through sanitary and phytosanitary standards and quasi quotas imposed through administrative controls.

Textile inputs, including certain qualities of yarn and fabrics, are also expected to be opened up by removing restrictions such as delayed approval of letters of credit and foreign exchange rationing. The government often uses these tools during periods of severe external pressure.

The government may remove barriers affecting imports of active pharmaceutical ingredients and finished medicines by addressing approval delays and foreign exchange-related restrictions. Curbs on luxury and non-essential goods, including cosmetics, chocolates, confectionery and pet food, are also expected to be withdrawn by June. Their imports are currently slowed through outright bans or licensing requirements.

Some restrictions affecting steel and construction materials may also be eased within the next couple of months. The government may remove regulatory duties and import priority restrictions to facilitate imports of flat steel and bars.

Phased plan and tariff changes

Pakistan has told the IMF that it cannot eliminate all restrictions immediately and will instead phase out those considered feasible over the next three years. The shortlisted measures will be presented to the Cabinet Committee on Regulatory Reform, where relevant ministries will provide input on whether the barriers should be retained or removed.

In addition to the removal of non-tariff barriers, the government has also committed to implementing the second phase of trade liberalisation from June. This includes plans to further reduce customs duties, additional customs duties and regulatory duties in the budget.

Under the agreed plan, the net weighted average tariff is to be reduced to below 6% by 2030. The government will phase out all additional duties currently charged on localised items in the auto sector, end the regime of special duties applied to imports used for the auto sector, including through the Fifth Schedule to the Customs Act and SRO 655, and extend the principle of removing preferential treatment for local production to other industries.

Foreign companies have again raised concerns about profit repatriation, and that European Union Ambassador to Pakistan Raimundas Karoblis recently took up the matter with the federal government.

The industry likely to be affected by the removal of these restrictions was not consulted, and concerns have been raised that the government accepted the IMF condition in haste.