By Umar Salman

Pakistan’s ever-increasing tax rates on imported goods have not only isolated the economy even
more from the rest of the world but also impacted negatively the local industries they were meant
to serve. As the import duties have been on an upward trajectory for more than 30 years, with
one of the most complex structures in the world, a reevaluation is long overdue.
Pakistan’s average tariffs, even surpass those of neighboring economies like India and
Bangladesh, both of whom enjoy a higher percentage of exports as a share of GDP. According to
the World Bank Group’s Pakistan Development Update: Staying the Course for Growth and
Jobs (October 2025), customs duties have generally been on a downward trend since 2019, but
the constant increment in the para-tariffs has rendered the decrease pointless, as the total tariffs
remain relatively high. The para-tariffs like the additional customs duties, and the regulatory
duties make the total tariff unbearable for most importers, creating an anti-export bias. This
limits imports but in turn, makes it harder for firms to export. With such unpredictable and high
tariffs, domestic businesses find it difficult to afford imported raw materials and machinery,
which are pertinent to manufacturing export goods.
The argument for these high tariffs has been that their aim is to protect local industries from
international competitors, prompting firms to focus on the local market and not seek international
demand. Citing the World Bank findings, a 1% increase in tariff rates relates to a 0.6% decrease
in end-stage efficiency, illustrating the procedural difficulty that import duties cause.
Additionally, such an increment also leads to similar levels of decrease in wages and sales of
firms, with both slowing down the economy. Such a policy also creates further real wealth
inequality in the country, as the already financially unstable middle class is unable to afford
international products and must stick to local alternatives.
However, the government’s National Tariff Policy 2025, which introduces a path to lowering the
average duty rate from 20.2% to 9.7% in a 5-year period, marks a significant step towards a more
stable and competitive import structure. As reported by the World Bank, if implemented, these
reforms would “place Pakistan among the most ambitious tariff reformers globally.”
Moreover, the tax reductions would place the average tariff rates of the country below India and
Bangladesh. The general concern that such low tariffs would cause a massive import revenue
drop is not a valid prediction, with the World Bank estimating the exports to outpace the import
growth in the medium term because of them. The populace would also benefit by having around
300,000 new jobs, and the country’s trade balance would improve by 7%.

The estimates on the benefits of the National Tariff Policy are also backed by the report’s
historical insights, as the revenue-to-GDP ratios remained stable for 80% of countries who cut
tariff rates significantly, with their trade-to-GDP ratios increasing by 5% percent on average,
highlighting better integration with the global economy. Notably, a market-determined exchange
rate is crucial for the effectiveness of this plan, as the historical overvaluation of the PKR would
act as a tax on the exports. A floating exchange rate, however, would increase the profitability of
the exports. This dual approach maximizes export competitiveness and provides the stable,
truthful price signals necessary to encourage investment in the tradable goods sector, ultimately
ensuring the projected job growth and improvement in the trade balance.
The National Tariff Policy gives Pakistan a unique opportunity to correct its 30-year course of
destructive import taxation, creating a more export-oriented economy that builds fiscal security.

References: Data and projections cited in this article are primarily based on the World Bank
Group’s report, Pakistan Development Update: Staying the Course for Growth and Jobs
(October 2025).