Islamabad (Web Desk/Agencies): In a landmark move towards long-awaited structural reforms, the federal government has removed additional customs duties on 4,000 out of 7,000 tariff lines and reduced duties on another 2,700, Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb said.
Announcing the measures during a post-budget press briefing on Wednesday, Aurangzeb termed the tariff changes a “major and important step” toward aligning Pakistan’s trade and industrial policies with international standards.
The minister explained that the tariff reforms are the beginning of a gradual overhaul of the existing system, aimed at simplifying the country’s complex tariff structure and targeting an average tariff rate of just above 4 percent.
“Overall, there are 7,000 tariff lines. Additional customs duty has been removed on 4,000 lines, and in 2,700 of those, the customs duty has also been reduced,” he said, adding that of these, around 2,000 tariff lines are directly linked to raw materials and intermediary goods used by the exporters.
Calling it one of the most significant reforms in decades, Aurangzeb emphasized the scope of the initiative.
“This is a structural reform that hasn’t been undertaken in the past 30 years. This is a huge step, and we’re committed to taking it forward gradually,” the finance minster asserted.
He said that the government aims to reshape the overall tariff regime to stimulate industrial growth and foster deeper integration into global supply chains.
Aurangzeb noted that the policy shift goes beyond just fiscal impact. He stated that this change represents a transformation in the country’s broader economic strategy, moving away from the entrenched protectionist system.
“This is not just about reducing duties—it’s about transforming the overall macroeconomic framework,” the minister stated, noting that “When we bring down protection, we improve resource allocation, which is crucial for economic efficiency and competitiveness.”
The finance minister said that the reforms are strategically designed to support an export-driven economic model, moving away from the long-preferred import substitution policies that have often triggered balance of payments issues.
“If we want to structurally reposition the country towards export-led growth, we need to change the very DNA of the economy,” said Aurangzeb. “That’s how we avoid falling into the same cycle of dollar shortages every time we try to grow.”
He also addressed fiscal measures focused on providing fairness and relief, particularly for the salaried class and mid-sized enterprises. Aurangzeb said that adjustments had been made within the bounds of fiscal responsibility.
“This is the direction of travel, where do we want to take the salaried class?” he remarked. “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.”
As part of efforts to enhance the business climate, the government has started to reduce the super tax on mid-sized corporations. Aurangzeb noted, “Even if it’s just a 0.5% reduction, it sends an important signal to the market.”
On reforms in the construction and housing sectors, he said that the government had acted to bring down transactional barriers, especially for buyers. While tax liabilities remain unchanged, the system has been restructured to be more efficient.
In parallel, the government is working with the State Bank of Pakistan (SBP) to introduce a new housing finance scheme aimed at expanding mortgage access.
“As important as the fiscal side is, access to credit is equally important,” the minister said.
In agriculture, which Aurangzeb described as a pivotal driver of economic growth, the minister highlighted steps taken to support farmers and rural development.
He clarified that while additional taxes on fertilizers and pesticides had been scheduled for June last year, the government negotiated with the International Monetary Fund (IMF) to delay implementation until this year.
The finance minister also shared that enhanced enforcement mechanisms have enabled the federal government to collect over Rs400 billion in additional revenue this fiscal year.
“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 stated.
Looking ahead, the tax-to-GDP ratio is projected to reach 10.4% in the current fiscal year and 10.9% in FY2025-26. To sustain this momentum, the government plans to introduce new legislation aimed at institutionalizing tax compliance, with the full backing of Parliament, the minister said.
Aurangzeb stressed the importance of legal frameworks to support enforcement, saying that lasting revenue growth depends on it.
He further explained that adjustments in public sector salaries and pensions are tied directly to changes in the Consumer Price Index, ensuring these increases reflect real inflationary trends.
On agriculture, he reiterated its role as the “backbone of our economy,” noting that livestock and dairy account for 60% of the sector’s GDP.
Aurangzeb underscored the need for greater coordination on devolved areas such as seed technology, agricultural mechanization, and credit access.
On the expenditure front, the minister reported a relatively modest 1.9% increase in government spending.
He credited this to prudent financial management, highlighting that despite inflation of 7.5%, the government had successfully contained subsidies and reduced debt servicing, while directing spending towards essential national priorities.