IMF urges removal of non-tariff curbs

Pakistan has assured the International Monetary Fund (IMF) that it would review more than 2,660 non-tariff barriers that discourage imports, and many of these will be removed soon, including those restricting the import of mobile phones and cars.

In yet another major concession agreed with the IMF under the $7 billion bailout package without much internal consultation, the government has assured the fund that it would start ending these restrictions from June this year, sources told The Express Tribune.

Barriers such as low priority in giving foreign exchange for car imports and linking mobile phone functionality to approval by the Pakistan Telecommunication Authority may be removed in June, said the sources. Once implemented, it may also become easier to import dairy products, textiles, steel bars and medicines, as existing non-tariff barriers are making it difficult to import these goods.

The sources said that as part of the understanding reached for the staff-level agreement, Pakistan has assured the IMF that it would remove all restrictions in June against 76 customs codes affecting imports in automobiles, pharmaceuticals, steel, food, agriculture products, cosmetics and mobile phones. The IMF was told that the government undertook a comprehensive review of import and export lines and found 2,662 non-tariff barriers with restrictive impacts on international trade. Pakistan told the IMF that after removing the first batch of restrictions, the remaining barriers will be reviewed in batches, focusing on the most economically distortionary measures first. These measures will be presented to the Cabinet Committee on Regulatory Reform for removal or simplification by end-November 2026, the sources added.

Restrictions affecting the automobile sector include completely knocked down (CKD) units, semi knocked down (SKD) kits, completely built units (CBUs) and high-end vehicles. The government discourages vehicle imports through import prioritisation via foreign exchange allocations, delayed approvals and additional regulatory duties.

Likewise, the import of smartphones and consumer electronics is restricted through approval by the Pakistan Telecommunication Authority, high regulatory duties and import licensing constraints. The government is considering ending non-tariff barriers that are slowing the import of refrigerators, air conditioners and washing machines. The imports of these items are discouraged through restrictions imposed via banking channels and discretionary clearance delays, said the sources.

In the agriculture sector, the government has assured barrier-free import of meat, dairy, packaged foods and edible oil. These imports are discouraged through sanitary and phytosanitary standards and quasi quotas via administrative controls, said the sources. Sanitary and phytosanitary standards and private voluntary standards are used to ensure food safety and animal and plant health before imports are made.

Textile inputs such as certain qualities of yarn and fabrics would be allowed to import without non-tariff barriers by eliminating restrictions like delayed approvals of letters of credit and foreign exchange rationing. The government often exercises these tools during times of extreme external pressure.

Foreign companies have again started complaining about the repatriation of profits, and the European Union ambassador to Pakistan, Raimundas Karoblis, has recently raised the issue with the federal government. The government may also remove non-tariff barriers on the import of active pharmaceutical ingredients (APIs) and finished medicines by addressing the issue of delays in approvals and foreign exchange-related restrictions. Restrictions related to the import of luxury and non-essential goods, including cosmetics, chocolates, confectionery and pet food, will be removed by June this year. Their imports are slowed through outright bans or licensing requirements. Some non-tariff barriers slowing the imports of steel and construction materials may also be removed within a couple of months. The government may do away with regulatory duties and import priority restrictions to smooth the imports of flat steel and bars.

However, the industry that will be affected by the elimination of these restrictions has not been consulted, and there are concerns that the government has once again accepted an IMF condition in haste. The use of non-tariff barriers is common in international trade, but some countries, like India, apply these more aggressively to protect local industries from foreign competition. The European Union has also set high safety and environmental standards for the import of goods, including textiles.

Pakistan has informed the IMF that it cannot abolish all restrictions at once but would phase out only those that are feasible over the next three years. The lists of restrictions shortlisted for removal will be presented to the Cabinet Committee on Regulatory Reform, where concerned ministries would give their input on whether to maintain or remove these barriers.

The sources said that in addition to removing these barriers, the government has also promised the IMF that it would implement the second phase of trade liberalisation from June. It plans to further reduce customs duties, additional customs duties and regulatory duties in the budget, said the sources.

According to the agreed plan, net weighted average tariffs must be brought down to below 6% by 2030. The government will phase out all additional duties currently charged for localised items in the auto sector, remove the regime of special duties applied to imports used for the auto sector, including through the Fifth Schedule to the Customs Act and SRO 655, and extend the principle of removing preferential treatment for local production to other industries.