ISLAMABAD: The National Tariff Commission (NTC) has cautioned the federal government of a possible fallout of imposing the highest-ever regulatory duties (RD) on goods imports ahead of the International Monetary Fund (IMF) executive board meeting, Dawn has learned from sources.

The IMF board meeting is scheduled for Aug 29 to approve disbursement of $1.18bn under the Extended Fund Facility (EFF).

Fearing the reaction from the IMF board members as well as other multilateral institutions like the Geneva-based World Trade Organisation (WTO) and the World Bank, the NTC’s top officials suggested the government avoid imposing regulatory duties ahead of the board meeting because many countries will be affected by this decision at a time when the global economy is slowing down.

Despite opposition from various quarters, including the NTC, to the decision, Finance Minister Miftah Ismail prevailed and implemented the decision to scale up regulatory duties from 20pc to 50pc and from 40pc to 100pc on nearly 800 items.

FBR says measures to yield around Rs20bn

Well-placed sources told Dawn the finance minister had convinced Prime Minister Shehbaz Sharif to approve his summary of imposing regulatory duties on nearly 800 items, including automobiles, mobile phones and other products.

The Federal Board of Revenue (FBR) made the announcement in the SRO1571 dated 2022.

The IMF’s executive board meeting for the combined seventh and eighth reviews under the EFF is scheduled for Aug 29. Pakistan has already withdrawn the three-month ban on 800 items under the direction of the IMF, and both the WTO and the government admitted that the decision to ban items caused damage to the retail sector.

The WTO and the IMF policies were working in synchronisation, a former Pakistan ambassador to the WTO told Dawn on condition of anonymity. He said the Fund always took input from the WTO Secretariat regarding the trade-related policies of the member countries.

These “anti-trade measures”, he said, might have a cost and give negative signals to trade partners and multilateral trade institutions.

The WTO has already conveyed its concerns over Islamabad’s ad hoc policy measures, like regulatory duties, which hamper the free flow of trade and cause injuries to local industries.

The global economies are stepping towards a slowdown in the wake of the Ukraine crisis. It will be difficult for Pakistan to defend these regulatory duties.

The FBR believes that the measures will generate around Rs20 billion in revenue. However, these regulatory measures will further disrupt the supply chain and further accelerate import-led inflation in the country.

The previous government shifted the authority to change tariffs from the FBR to the Tariff Policy Board (TPB), chaired by the commerce minister. Any changes in tariffs are now the sole prerogative of the TPB, according to a senior official in the commerce ministry. This was the sole reform measure implemented in compliance with IMF recommendations under its loan programme.

Ahead of the Tariff Policy Board meeting, the finance ministry has already finalised a summary regarding changes in tariffs in consultation with the tariff policy wing of the customs department at FBR, a tax official said, adding that on the same summary, the TBP meeting was convened last Sunday at a short notice.

Commerce Minister Naveed Qamar, TPB’s chairperson at present, was taken on board virtually to give legal cover to the summary. The meeting was also attended by Mr Ismail, who is not a member of the TPB. “A finance minister cannot attend this meeting,” the source said, adding that Miftah Ismail actually suggested changes in determining the regulatory duties on specific sectors.

According to the source, Mr Qamar also opposed the regulatory duties. However, the finance minister prevailed and informed the committee that the prime minister wanted to impose regulatory duties, the source said.

The source said the only beneficiaries of this decision were local food manufacturers, which would further increase the prices of their products and earn a windfall profit.

Regulatory duties

The regulatory duty on new four-by-four vehicles, minivans, all-terrain vehicles and sport utility vehicles (SUVs) has been raised to 100pc. The new duties will remain in place until Feb 21 next year.

Moreover, an additional 7pc customs duty imposed on all those goods falls under the tariff slab of 30pc, higher slabs and specific rates. However, a 2pc duty will be levied on goods falling under specific PCT codes, as well as cars, jeeps, and light commercial vehicles in CKD condition with displacements greater than 1,000cc and heavy commercial vehicles in CKD condition.

A 35pc additional customs duty was imposed on SUVs. The regulatory duty on the import of new vehicles with a cylinder capacity of 1,000cc to 1,300cc has been increased from 5pc to 100pc.

For spring, air, or gas guns and pistols, truncheons, firearms and similar devices that operate by firing an explosive charge, the duty was raised to 45pc.

The duty on jams, fruit jellies, marmalades, fruit or nut puree, and fruit or nut pastes (obtained by cooking, whether or not containing added sugar or other sweetening matter), spectacles, goggles has been raised to 49pc.

Moreover, the regulatory duty on pianos, including the automatic ones, and other string musical instruments has been increased to 47pc.

Published in Dawn, August 25th, 2022