In a major policy shift, the government has banned the import of used cars under the baggage scheme and approved massive financial injections into the power sector and PIA, signaling renewed economic strain despite repeated reform claims. These decisions, taken by the ECC chaired by Finance Minister Muhammad Aurangzeb, outline Pakistan’s attempt to stabilise the energy sector and manage fiscal pressure while tightening import controls.
Pakistan has long struggled with rising circular debt, deteriorating power companies, and a loss-making national airline. At the same time, the auto sector has faced criticism for high prices, low competition, and pressure from the IMF to open the market to used car imports. The new ECC decisions reflect a shift towards revenue protection while balancing IMF commitments.
The Economic Coordination Committee on Tuesday abolished the baggage scheme for used car imports, ending a long-standing facility for overseas Pakistanis. The ECC tightened the remaining Gift and Transfer of Residence schemes by increasing the required stay abroad from 700 to 850 days, extending the permissible import period to three years, and keeping imported vehicles non-transferable for one year. Cars must now also be imported only from the sender’s country of residence.
A senior official told the meeting,
“These measures aim to regulate misuse of schemes while ensuring safety and environmental compliance.”
The move, however, restricts competition in Pakistan’s automobile market, contradicting earlier expectations under IMF-supported liberalisation.
The ECC simultaneously approved the Circular Debt Management Plan 2025-26, allowing a Rs522 billion addition to the circular debt flow. Despite higher tariffs and improved recoveries, the power sector will add this amount to its already stressed system, which will then be offset using budgetary subsidies to maintain overall debt at Rs1.614 trillion. According to the plan,
“The impact of circular debt will be neutralised through tariff adjustments, loss reduction, and fiscal support.”
In another major decision, the ECC approved Rs2.5 billion for pensions and medical bills of Pakistan International Airlines (PIA) employees. Combined with already budgeted allocations, the government will inject Rs34.7 billion into PIA this fiscal year. Defence authorities warned that delayed disbursement could trigger defaults on PIA’s domestic and foreign loan obligations.
The ECC also raised profit margins for oil marketing companies and petroleum dealers, resulting in a Rs2.56 per litre increase in petrol and diesel prices. Half of the margin increase will be released immediately, with the rest dependent on sector digitisation progress.
Additional decisions included restricting chloroform imports to pharmaceutical companies only, approving Rs1.28 billion for the Pakistan Digital Authority, and allocating Rs5 billion to the Housing and Works Division.