IMF approves import of 5-Year-Old vehicles in Pakistan

In a major policy shift, the International Monetary Fund (IMF) has approved the federal government’s proposal to allow the import of five-year-old vehicles starting September 2025, as confirmed by Ministry of Commerce officials during a briefing to the Senate Standing Committee on Finance.

The new import policy includes a 40 percent additional duty on these vehicles in the initial phase. However, this duty will be reduced gradually by 10 percent each year starting fiscal year 2026-27, until it is completely removed, leaving only the standard import duties in place.

Officials also disclosed that the long-standing restriction on importing three-year-old vehicles has been lifted. In a further relaxation of import rules, vehicles up to seven years old will be eligible for import from FY27 onward.

Exemption for Baggage Scheme Imports

For cars imported under the baggage scheme, the 40 percent additional duty will not apply. However, such imports must meet the 700-day overseas stay requirement to qualify under this exemption.

In a separate discussion, the committee rejected amendments proposed by the Ministry of Finance to the Public Finance Management Act (PFMA). Ministry officials argued that the current law gives financial autonomy to institutions under Parliament’s direction. The committee, however, instructed the ministry to redraft the amendments.

During the session, Senator Anusha Rehman questioned the treatment of surplus profit and idle funds and called for extending audit coverage of the Auditor General of Pakistan to all public and autonomous entities. In response, the ministry agreed to revise the wording from “business entities” to “public entities”, acknowledging the need for legislative clarity.

One example of this issue was the Port Qasim Authority, which declined to transfer surplus funds when requested. The Ministry of Finance said they referred the matter to the relevant division but received no response.

Meanwhile, the Federal Board of Revenue (FBR) shared significant progress on customs reforms. According to the Member Customs Operations, customs duty has already been reduced on 35 percent of tariff lines.

To further streamline trade, the government plans to introduce new duty slabs of 5%, 10%, and 15%, replacing the current 3%, 11%, and 16% brackets. Additionally, duty on 916 more tariff lines will be reduced to zero, increasing the total number of zero-rated items to 3,117.

These reforms aim to simplify the tariff structure and promote ease of doing business in the country.