Pakistan will cut taxes on imports of raw materials to spur manufacturing and overall economic growth, Adviser to the Prime Minister for Commerce and Investment Abdul Razak Dawood has said.
The adviser, in a telephone interview with Bloomberg, a New York-based international news agency, said customs duties on input items needed by pharmaceutical, chemical, engineering and food processing industries would be reduced by 3% to 10%. That, he said, would help lower the import of finished goods, encourage local production and put the nation in a position to boost exports.
“Pakistan had ridiculously high duties,” Dawood was quoted as saying by Bloomberg. The objective was to put Pakistan on par with other countries on trade taxes, he said, adding that the proposal would find mention in the Federal Government’s annual budget for the year starting July 1, by when it targeted to achieve a growth rate of 4.8%.
The new budget is scheduled to be presented in the National Assembly on June 11.
Paring import taxes would be a huge policy shift for Pakistan, given more than 40% of its total tax revenue was generated from levies on inbound shipments, Bloomberg pointed out. Prime Minister Khan’s government was seeking to end the nation’s reliance 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 government would extend concessional long-term financing for exports as well as working capital financing to businesses in the next fiscal year, Dawood said. The nation’s exports had not grown significantly in the past decade, averaging $23 billion annually. For the next financial year, the government hoped it would be higher than $25 billion.
Pakistan’s economy survived through the global coronavirus pandemic with support of international lenders and debt repayments reliefs by G-20 nations, Bloomberg noted.
The slow pace of tariff liberalization thus far had hurt Pakistan’s competitiveness, compared with regional nations like Bangladesh, Malaysia and Vietnam, whose total exports consist of 40% imported components, Manzoor Ahmad, Pakistan’s former ambassador to the World Trade Organization (WTO), was quoted as saying in the dispatch.
“We take imports as an evil. This misperception must go away,” he said. Without “imports, there will be no increase in exports,” he said.