Pakistan will reduce taxes on raw material imports to boost manufacturing and overall economic growth, according to trade adviser to Prime Minister Imran Khan.
Tariffs on inputs needed by the pharmaceutical, chemical, engineering and food processing industries will be reduced by 3% to 10%, Abdul Razzak Dawood, Khan’s trade adviser, said in a telephone interview. This will help reduce imports of finished products, encourage local production and put the country in a position to boost exports, he said.
“Pakistan had ridiculously high duties,” Dawood said. The aim is to put Pakistan on an equal footing with other countries when it comes to trade taxes, he said.
The proposal will be mentioned in the federal government’s annual budget for the year beginning July 1, when it aims to achieve a growth rate of 4.8%. The country is forecasting 3.9% growth this year after a rare contraction last year. The new budget is expected to be presented to the lower house of parliament on June 11.
The reduction in import taxes will be a major policy change for Pakistan, as more than 40% of its total tax revenue is generated by levies on inbound shipments. Khan’s government seeks to end the country’s dependence in recent years on foreign loans and bailouts, and instead boost industrial productivity and the share of exports in the economy.
To that end, the administration will expand long-term concessional financing for exports as well as working capital financing to businesses in the next fiscal year, Dawood said. The country’s exports have not increased significantly over the past decade, averaging $ 23 billion annually. For the next fiscal year, the government hopes it will be over $ 25 billion.
The Pakistani economy has survived the global Covid-19 pandemic with support from international lenders and debt repayment relief from G-20 countries.
Slow tariff liberalization so far has hurt Pakistan’s competitiveness, compared to countries in the region such as Bangladesh, Malaysia and Vietnam, whose total exports consist of 40% of imported components, has said Manzoor Ahmad, former Pakistani Ambassador to the The world trade organization.
“We take imports as evil. This misperception must go away, ”he said. Without “imports, there will be no increase in exports,” he said.