A long overdue measure has been taken by the incumbent government in the shape of imposition of a complete ban on the import of non-essential and luxury items to control dollar flight. Luxury vehicles, costly cosmetics and some other non-essential items are included in the list of 30 luxury imports that devour a huge chunk of foreign reserves as the payments are mostly made in US dollars. A number of factors have prompted the government to take this tough decision. Those factors include increasing trade deficit, free fall of rupee, dwindling foreign reserves and IMF pressure to withdraw subsidies on POL and power sector. Talks are already on about taking tough decisions to put the economy back on track and the current step is being termed as part of the measures in that direction. The suggestion has already been deliberated in a meeting among the government and its allies for making a strategy to fend off economic crisis. There are speculations that the ban is temporary in nature and will be lifted with three to four months. It is a reality that our foreign reserves have been depleting fast, partly due to the import of such items, while the ban will make an estimated monthly impact of about $300 million.
A lull in Pakistani exports and a relative spike in imports have led to a shortage of dollars in the economy, putting pressure on the local currency and dwindling foreign currency reserves. Earlier, the government resorted to imposing enhanced regulatory duties on imported items but a lot more was required to be done to ensure a balance in imports and exports. If the government implements the import ban, it can decrease its ever increasing import bill to some extent. Gross imports of various food and luxury items are increasing in Pakistani markets from Europe due to a number of reasons. Many things — including technological advances and changes in domestic and trade policies influence international commodity markets, but the preferences of consumers also have a major impact on shifts in commodity trading. With the effects of globalisation, various trade items are becoming more and more popular in major cities of the country and urbanisation added to the mix. A clear reason for a massive increase in imports is that now consumers hailing from wealthy families never hesitate to pay hefty amounts for imported items. When their incomes rise, changes in diets and purchases become inevitable and make an immediate and pronounced impact on trade. In addition to rising incomes, rapid urbanisation is contributing to changes in lifestyles, food preferences and even the structure of commodity trade. For example, as their purchasing power grows, people in cities buy more diverse food items and more products.
On the other hand, such a trend puts a negative impact on local industry and the common man. The replicas of costly imported items are produced in the country, which too become expensive for the common man while the copy culture gives birth to an industry producing cheap and substandard items. The only way is reliance on those indigenous items which are produced locally while meeting the set standards of quality. Regarding luxury items, it is rare that a person from a middle class uses a costly saloon in his daily life as he cannot afford its purchase. The same formula is applied on other such items, which have no relevance for a common man. Thus their ban will make no impact on their lives. The government should not be complacent after imposing a ban. Rather it should take some concrete steps for improving the standard of indigenous items so that the customers, who mostly rely on imported items, can turn to Pakistani products. Moreover, by improving the standard of locally produced items, the same can also be exported to the international market brining in the much-needed foreign exchange. Increasing income through the trade of locally produced items is one way the government can increase country’s cash earnings.
The worrisome factor is that Pakistani manufacturing industries have failed to increase the level of export, which is considerably low compared to the import of different items. This difference is leading to a hefty payments bill through the national exchequer. Paying for imports can strain the resources in Pakistan where economic growth lags and foreign exchange earnings are limited. In this situation, the imposition of a short-term ban on the import of luxury items needs to be welcomed. At the same time, government needs to introduce farmer and industrial friendly policies and lay a network of roads as well as infrastructural development in rural areas so that local producers could transport their products to the urban markets with more ease. At the international level, government needs to engage experts for branding of its items to make them more acceptable. Surely these measures will help decrease the existing trade deficit. The real way to maintain a balance is to increase productivity and focus on subsidies on selective export items besides controlling imports to live within the means the nation can afford. In this regard, the government can abolish GST on certain export items for making them affordable in the international markets.