Pakistan budget tax proposals threaten EV and solar growth

The International Monetary Fund has urged Pakistan to set a 25 % sales tax on imported electric vehicles, far higher than the 1 % rate the government had floated. The IMF classifies the vehicles as luxury goods and opposes any tax concession, while the government is also considering reduced duties on raw materials and parts for domestically assembled vehicles.

At the same time, a pre‑budget plan proposes raising the sales tax on solar panels from the current 10 % to 18 %. Analysts warn that the increase could raise installation costs and slow the rapid expansion of rooftop solar, which has already cut Pakistan’s oil and LNG imports by about 40 % since 2022 and saved an estimated US$12 billion. Installed solar capacity is around 53 GW as of early 2025. The outcome of these tax measures will shape the country’s renewable‑energy transition and its balance‑of‑payments outlook.