The business community has urged the government to immediately curb the import of luxury goods as the country heads into economic chaos.
“Pakistan is heading towards an economic crisis,” warned Employers’ Federation of Pakistan (EFP) President Ismail Suttar in an interview with The Express Tribune.
The deterioration of the balance of payments position, high inflation, depletion of foreign exchange reserves and political uncertainty have led the country to an alarming economic situation, he said.
“It is devastating that Pakistan has been facing a trade deficit consistently since 2003,” Suttar said. “Immediate action and the implementation of strict policies to control the situation is the need of the hour.”
Pakistan absolutely had to reduce non-essential imports, stressed Fawad Basir, head of research at AL Habib Capital Markets. “That will help to some extent, but that should be the starting point,” he said.
He pointed out that in July-March 2021-22, imports of completely knocked down motor vehicles (CKD) amounted to 1.3 billion dollars, while imports of completely built units (CBU) reached 240 million. of dollars.
“If we just stop this, it will not only boost our local auto industry, but also reduce the impact on the current account deficit (CAD) by about $1.5 billion,” he calculated.
On the contrary, some experts were of the view that it would be very difficult for Pakistan to avoid imports.
Pakistan Business Council (PBC) chief executive Ehsan Malik pointed out that most “imports are unavoidable, at least in the short term – such as fuel, food, machinery, chemicals, medicines, etc. “.
“Others are materials needed for domestic manufacturing and exports, such as cotton and synthetic fibers,” he said.
“That leaves a small chunk of around 5% where import restrictions can work without hurting the economy,” he pointed out.
This part included mobile phones and vehicles in a fully constructed form, Malik said, adding that dried fruits, pet food, etc. were also included.
Restrictions could range from a steep duty to an outright ban, he said. “High tariffs will have a limited effect because the demand for these items is not elastic and will not decrease even with high tariff rates,” he pointed out.
Pakistan’s trade balance would benefit the most from a decline in fuel demand, he noted. “A general subsidy makes fuel more affordable and works against reducing demand,” he said.
Unisame Chairman Zulfikar Thaver pointed out that “the world is facing an economic crisis, including inflation, food shortage, expensive fuel, etc.”
“Only countries that have reserves and agricultural self-sufficiency will be able to handle the situation,” he said, adding that developed countries were also feeling the pinch and the difficulties.
“A strategy is needed to deal with these challenges,” he said. “Honest leadership is needed at all costs.”
“In the past we have seen the role of politicians and how they have amassed wealth at the expense of the nation,” Thaver stressed, adding “we must elect good leaders who are honest, otherwise it will be impossible to get out of the mess. “.
AHL head of research Tahir Abbas said the country should impose a financial emergency to curb non-essential imports, especially luxury goods, to save foreign exchange reserves.
Also, the government should allow four working days and one working day from home, up from five to six working days to curb oil demand and imports, he said.
In addition, market hours across the country should be revised – from 8 a.m. to 6 p.m. – to save electricity, he added.
Published in The Express Tribune, May 18and2022.
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