ISLAMABAD: Pakistan’s Economic Coordination Committee (ECC) has announced a ban on used car imports under the baggage scheme, tightened rules for other import programs, and approved a Rs522 billion boost to the country’s persistent circular debt—moves that highlight ongoing fiscal and structural challenges in the economy.
The committee, chaired by Finance Minister Muhammad Aurangzeb, also greenlighted a Rs2.5 billion budgetary allocation to cover pension and medical expenses for Pakistan International Airlines (PIA) employees, on top of the Rs31.7 billion already set aside for the airline’s legacy loan interest payments.
Power Sector Pressure
Under the new Circular Debt Management Plan for FY2025-26, Rs522 billion will be added to the flow of circular debt, to be offset through government subsidies. Despite recent tariff hikes and some recovery improvements, the net circular debt is projected to remain at Rs1.614 trillion. The ECC has called for a medium-term plan to gradually reduce fiscal support while improving accountability among power distribution companies.
Vehicle Import Restrictions
The ECC’s decision abolishes the baggage scheme, leaving only the Transfer of Residence and Gift Schemes. Stricter rules include a minimum three-year stay abroad for eligibility, a one-year non-transferable period for imported vehicles, and safety and environmental compliance requirements. The cumulative stay abroad requirement has risen from 700 to 850 days. Analysts warn the restrictions may limit competition and undermine the IMF-backed reforms aimed at liberalising the auto sector.
Fuel Price Hike
Petrol and diesel prices will rise by Rs2.56 per litre following an adjustment in margins for oil marketing companies and petroleum dealers. The increase, partially linked to progress in the government’s digitisation agenda, will raise oil company profits by Rs1.22 per litre and dealer margins by Rs1.34 per litre.
PIA Bailout
The ECC’s approval injects Rs2.5 billion into PIA Holding Company Limited for employee pensions and medical expenses. Including prior allocations, the total fiscal support for the airline in the current fiscal year reaches Rs34.7 billion, highlighting ongoing financial pressures despite repeated claims of reform.
Other Measures
The ECC also restricted imports of chloroform to pharmaceutical companies only, approved a Rs1.28 billion supplementary grant for the Pakistan Digital Authority, and allocated Rs5 billion to the Housing and Works Division for 2025-26.
These decisions underscore Pakistan’s ongoing struggle to balance fiscal constraints, structural reforms, and social obligations while managing inflationary pressures and public services.
