- Advertisement -
ISLAMABAD, Jun 11 (APP):In a major step toward structural reform, the federal government has eliminated additional customs duties on 4,000, out of 7,000 total tariff lines, and reduced duties on a further 2,700, Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb announced on Wednesday.
Speaking at the post–budget press briefing, Aurangzeb described the tariff rationalisation as a “major and important step” in aligning Pakistan’s trade and industrial policy with global standards. The initiative, he said, marks the beginning of a phased plan to transition towards a simplified tariff regime, ultimately targeting more than 4 percent reduction in tariff regime in Pakistan.
“Overall, there are 7,000 tariff lines. Additional customs duty has been removed on 4,000 lines, and reduced customs duty on 2,700 tariff lines,” the finance minister explained. “Of these, around 2,000 tariff lines are directly linked to raw materials and intermediary goods used by exporters.”
Aurangzeb emphasised that the reduction in input costs for exporters would help improve competitiveness in international markets — a critical requirement as the country seeks to boost its export base and narrow trade deficit.
“This is a structural reform that hasn’t been undertaken in the past 30 years,” he said. “From a reform perspective, this is a huge step, and we’re committed to taking it forward gradually.”
The government’s broader goal, according to Aurangzeb, is to reshape Pakistan’s tariff architecture in a way that supports industrial growth and integrates the economy more deeply into global supply chains.
The minister said tariff reforms were more than a fiscal measure — they mark a fundamental shift in Pakistan’s economic model, aimed at dismantling long-standing protectionist regime and laying foundation for sustainable export-led growth.
“This is not just about reducing duties — it’s about transforming the overall macroeconomic framework,” the minister stated adding this sets the direction of travel.
The reforms are designed to gradually replace import substitution with export promotion, a pivot the government considers essential for addressing Pakistan’s recurring balance of payments crises and dollar liquidity pressures.
“If we want to structurally reposition the country toward export-led growth, we need to change very DNA of the economy,” Aurangzeb said. “That’s how we avoid falling into the same cycle of dollar shortages every time we try to grow.”
The minister, touched on broader fiscal measures aimed at ensuring equity and sustainability, particularly for salaried individuals and mid-sized businesses. He noted that the government has offered as much relief as possible to the salaried class within constraints of available fiscal space.
“Different slabs, including at the highest levels, have been carefully considered. From both, my perspective and the Prime Minister’s, we provided as much relief as the fiscal space allows.”
He also pointed to the phased reduction of the super tax on mid-sized corporations as part of the government’s commitment to improving the business climate. “Even if it’s just a 0.5% reduction, it sends an important signal to the market,” he added.
Aurnangzeb said the government announced a series of targeted reforms in the construction and agriculture sectors, aimed at reducing transaction costs, supporting affordable housing, and ensuring credit access for small farmers.
Addressing recent concerns around construction-related taxes, the minister clarified that while overall tax liability has not been reduced, the government restructured system to lower transaction costs, particularly for buyers.
In a bid to promote home-ownership, the government is also prioritizing access to mortgage financing. “As important as the fiscal side is, access to credit is equally critical,” the minister said. He revealed that, in collaboration with the State Bank of Pakistan, the government is preparing to launch a new housing finance scheme to enable individuals to build homes through accessible credit.
On the agriculture front, Aurangzeb described the sector as a critical for economic growth. He clarified that additional taxes on fertilizer and pesticide were to be implemented last June, however government negotiated with International Monetary Fund (IMF) and got it delayed it till this year.
The minister said strengthened enforcement mechanisms have helped the federal government generate over Rs400 billion in additional revenues this fiscal year. He noted that while international stakeholders had previously doubted Pakistan’s ability to implement tax laws effectively, the government has now demonstrated that meaningful enforcement is possible.
He said, tax-to-GDP ratio was projected to reach 10.4% this year and to 10.9% in FY2025-26. As part of the broader reform agenda, the government is preparing to move forward with a legislative push, engaging both houses of Parliament to introduce amendments, aimed at strengthening tax enforcement. Aurangzeb emphasized that legal backing would be critical to institutionalizing compliance and sustaining revenue growth.
To a question, the minister said the increases in salaries and pensions were directly linked to the headline inflation, Consumer Price Index (CPI), ensuring adjustments reflect inflationary pressures.
He reaffirmed the government’s commitment to agriculture as the central engine of economic growth, with a particular focus on dairy and livestock, which account for 60% of the sector’s GDP. “Agriculture has been, and will remain, the backbone of our economy,” he said, adding that greater federal policy coordination is needed on devolved subjects like seed technology, mechanization, and agri-financing.
On the fiscal front, he reported a modest 1.9% rise in government expenditure, crediting prudent financial management. He said, despite inflation at 7.5%, the government managed to contain subsidies and reduce debt servicing, while selectively increasing spending where necessary for national priorities, Aurangzeb said.
In a bid to bring Pakistan’s vast informal economy into tax net, the federal government is moving decisively to document the estimated over Rs 9.4 trillion cash economy through digitalization and targeted regulatory reforms.
Responding to a question, Aurangzeb stated that the government was fully committed to transitioning towards a digital economy. “We are taking concrete steps to reduce reliance on cash and promote a formalized, technology-driven ecosystem,” he said.
As part of the effort, a domestic e-commerce framework has been developed to regulate the local digital market. A simplified tax regime has been introduced for small businesses and SMEs, operating through online platforms.
Under the new policy, such businesses will be required to register for a National Tax Number (NTN) and pay a minimal 0.25% tax based on their mode of digital payment. Standard sales tax will continue to apply to online purchases, aligning digital and traditional commerce.
In response to a question, the finance minister said that the government has imposed 18% General Sales Tax (GST) on import of solar power plants as part of its strategy to support and incentivise local solar panel manufacturing.
Post-Budget-Repayment.
To another question, the minister said the government was prepared to make the first installment payment of $500 million on Euro bonds due in September this year. The second installment was scheduled for March – April next year, adding the government was fully equipped to manage its external financing obligations.
He also announced the launch of Pakistan’s inaugural Panda Bond issuance later this year. The government, he said, is working to secure credit enhancement through the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB), a process currently underway.
Highlighting the importance of diversifying trade and investment avenues, Senator Aurangzeb emphasized the government’s commitment to expanding access to international financial markets. “With our improving international credit ratings, we aim to access the Euro and US dollar bond markets by calendar year 2026,” he said.