The federal government has reached an agreement to share the draft of the Automobiles and Auto Parts Manufacturing Policy (2026-31) with the International Monetary Fund (IMF) before seeking final approval from the federal cabinet.
This unprecedented move signals the global lender’s growing influence over Pakistan’s industrial framework, specifically targeting the highly protected automotive sector to ensure it aligns with international trade standards.
Phasing Out Protections
Under the new policy guidelines, the government is set to dismantle long-standing protections for local car assemblers. The IMF is pushing for a significant reduction in net weighted average tariffs, aiming for a single-digit rate of 6% by the year 2030.
This shift is intended to open the domestic market to foreign players and reduce the monopoly of current manufacturers who have, for decades, relied on high import barriers to remain competitive despite limited localization.
Ambitious Export and Production Targets
Despite the tightening of regulations, the policy remains focused on growth. The government aims to boost vehicle production to over 500,000 units annually within the next five years. Furthermore, a central pillar of the 2026-31 plan is to transform the sector into an export-oriented industry.
Authorities are targeting a massive increase in automotive exports, aiming to jump from the current $300 million to approximately $3 billion by 2031, provided that local quality meets international benchmarks.