Islamabad – 08/08/2025: PAAPAM (Pakistan Association of Automotive Parts and Accessories Manufacturers) has issued a strong rebuke of the proposed National Tariff Policy (NTP) 2025–30, calling it a “textbook” approach that fails to account for the complex and fragile state of Pakistan’s economy. According to the association, the policy, which appears to follow a prescription from the IMF, overlooks critical issues such as security challenges, weak governance, high energy costs, and political instability.
The association warns that instead of boosting exports and industrial growth, the new policy could lead to deindustrialization, a wider trade deficit, and a drop in government revenue.
Flaws in the Policy’s Foundation
PAAPAM’s criticism centers on what it calls “flawed assumptions” in the policy’s economic modeling. The association argues that the NTP relies on outdated and static assumptions, such as a fixed exchange rate, that are completely out of touch with Pakistan’s volatile economic landscape. Furthermore, it believes the policy ignores key issues like institutional corruption and the country’s massive informal economy, which accounts for 35% of all economic activity.
The group also points out that the policy overlooks the Export Facilitation Scheme of 2021, which already allows for zero-rated imports for export-oriented industries.
Lower Tariffs Won’t Solve Core Problems
PAAPAM insists that simply lowering tariffs will not fix Pakistan’s deep-seated structural issues. The association highlights that high energy costs, unaffordable credit, poor logistics, and outdated technology are the real barriers to industrial growth. It notes that major export sectors—like textiles, leather, and surgical goods—already benefit from duty exemptions, yet they remain hampered by low productivity and security concerns that limit their access to foreign buyers.
The association fears that tariff liberalization could simply lead to an increase in non-essential imports, further straining the country’s trade balance.
Revenue Loss and International Warnings
The NTP 2025-30 estimates a potential revenue loss of Rs. 228 billion. PAAPAM is skeptical that this loss will be offset by increased economic activity, especially in an environment with low tax compliance. The group cautions that lowering import taxes without also strengthening direct taxation is a high-risk strategy.
To bolster its argument, PAAPAM points to countries like Ghana, Zambia, and Jamaica, which faced deindustrialization and export stagnation after implementing similar liberalization policies.
In conclusion, PAAPAM believes the NTP 2025–30 is fundamentally disconnected from its stated goals. The association asserts that without first addressing core economic weaknesses, building investor trust, and engaging with stakeholders, the policy is likely to repeat the failures of past reform efforts.
