Significant developments have been made in the new tariff policy as part of the ongoing negotiations between Pakistan and the International Monetary Fund (IMF) regarding the fiscal targets of the 2025-26 federal budget.

According to official documents, the IMF has accepted Pakistan's proposal to reduce customs and regulatory duties under the 2025-30 Tariff Policy Framework.

The IMF and the Pakistani government are aligning on policies aimed at modernizing the automotive sector, promoting environmentally friendly electric vehicles (EVs), and phasing out traditional fuel-based cars. It is projected that by 2030, 30% of new vehicles in Pakistan will be EVs. To facilitate this shift, the government is planning to introduce a subsidy scheme for battery-powered vehicles and develop a nationwide EV charging station infrastructure.

Essentially, the government has assured the IMF that it will lift the ban on the import of vehicles up to five years old in the upcoming budget. In contrast, to discourage fossil fuel usage, a carbon levy of Rs. 5 per litre will be imposed on petrol and diesel vehicles for two years, from July 2025 to June 2027.

The IMF estimates that these green initiatives will lead to a 30% reduction in pollution caused by transport emissions by 2030. The government has also agreed to reduce tariffs and tax incentives currently enjoyed by local automobile manufacturers. The IMF is also pushing for the opening of commercial vehicle imports, which would further liberalize the market.

Additionally, the upcoming budget may include a supplementary sales tax on petrol and diesel vehicles, alongside a proposal to increase the petroleum levy to Rs. 100 per litre. The IMF will assist Pakistan in the implementation of a new five-year EV policy, which is expected to positively impact air quality and public health.

The IMF has further recommended eliminating non-tariff barriers to ease the import of goods, making Pakistan’s trade environment more transparent and competitive.