Pakistan agreed with the IMF to introduce a new five-year auto sector policy. The plan will gradually reduce tariffs on vehicle imports as part of trade reforms tied to the $7 billion bailout program. Under the planned policy, Pakistan lowers vehicle import tariffs from the current weighted average of 10.6 percent. The rate will drop to 7.4 percent over four years by 2030. The upcoming 2026-27 budget will take the first step. The average rate will fall to 9.5 percent.

The move fulfills Pakistan’s commitments under the IMF’s Extended Fund Facility. The Fund calls for lower trade barriers and a simpler tariff regime. Officials said the government also agreed not to impose any new regulatory duty on imports. The new system replaces the current tariff structure with four slabs. Those slabs include 0 percent, 5 percent, 10 percent, and 15 percent. Customs duty on completely built-up vehicles will cap at 15 percent over the next five years. This means Pakistan lowers vehicle import tariffs significantly for consumers.

The new auto policy takes effect from July 1, 2026. The government will prepare the policy and share the draft with the IMF by the end of the month. The prime minister and federal cabinet will then approve it. Officials say the aim is to promote local manufacturing and increase localization of parts. Consumers will see lower vehicle prices. A 40 percent regulatory duty on used vehicle imports will reduce over time and eventually hit zero. The Motor Vehicle Development Act has already been submitted to parliament. Lawmakers will approve it before the end of June.